The Internal Revenue Service (IRS) has made significant strides in its effort to recover unpaid taxes from wealthy Americans, thanks to the funding provided by the Inflation Reduction Act (IRA). In less than a year, the IRS has recouped more than $1 billion from high-income individuals, marking a milestone in its crackdown on tax evasion among the affluent.
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IRS Recovers Over $1 Billion in Delinquent Taxes
The IRS, in collaboration with the U.S. Department of the Treasury, announced that it had recovered $172 million from 21,000 wealthy taxpayers who had not paid their taxes since 2017. Additionally, it recouped $1.1 billion from individuals with outstanding tax debt exceeding $1 million in income.
These early successes stem from a larger initiative that was launched last fall and is backed by the Biden administration’s economic legislation.
The crackdown specifically targets “high-income, high-wealth individuals” who owe more than $250,000 in recognized tax debt.
This initiative has proven effective, with nearly 80% of the 1,600 millionaires identified through the program having made payments. By July 2024, the IRS had already recovered $1 billion through this effort.
New Initiatives Target Wealthy Tax Evaders
Building on this momentum, the IRS introduced a similar program in February 2024 to pursue 125,000 wealthy individuals who have not filed taxes since 2017. This initiative aims to further tighten enforcement against tax evasion among high earners and individuals with significant income.
The IRS has also focused on closing tax loopholes often exploited by the wealthy. One of the major loopholes targeted is “basis shifting,” a method where individuals or businesses move assets to related parties in order to avoid taxes.
The IRS expects that closing this loophole could generate more than $50 billion over the next decade. New regulations and rulings will be introduced to address this issue, enhancing the agency’s ability to capture lost revenue.
IRS Modernization and Technology Improvements
A key factor in the IRS’s increased effectiveness has been its modernization efforts, funded by the $57.8 billion it received through the IRA. As of March 2024, the IRS had spent $5.7 billion of these funds on tax enforcement, business systems modernization, taxpayer services, and operations support.
The modernization effort includes upgrading 65-year-old technology and launching more digital tools in the past two years than in the previous two decades.
One notable achievement is the Direct File program, which allows taxpayers to electronically file their returns directly with the IRS at no cost. Initially piloted in a limited number of states, the program will be expanded nationwide for the 2025 tax season, making it easier for taxpayers to meet their filing obligations.
The Broader Impact of the Inflation Reduction Act on Tax Collection
The IRA’s funding has enabled the IRS to enhance its enforcement capabilities significantly, focusing on ensuring that high-wealth individuals pay their fair share of taxes. The agency’s early successes in recovering more than $1 billion illustrate the potential for further revenue gains as the IRS continues its efforts to close tax gaps and modernize its infrastructure.
In the long term, the agency expects that by continuing to target tax evasion through enforcement initiatives, closing loopholes, and modernizing its technology, it will be able to raise billions of dollars in revenue that would have otherwise gone uncollected.
The IRS’s crackdown on wealthy Americans who evade taxes, supported by the Inflation Reduction Act, has already yielded over $1 billion in recovered taxes, marking a significant achievement for the agency.
With the continued pursuit of high-income individuals and businesses, as well as efforts to close tax loopholes, the IRS is on track to raise tens of billions more in the coming years.
The modernization of IRS technology and the rollout of digital tools like the Direct File program further highlight the agency’s commitment to improving taxpayer services while increasing tax compliance among the wealthiest Americans.
FAQs:
What is the IRS’s recent crackdown on wealthy Americans about?
The IRS, supported by the Inflation Reduction Act, has launched an initiative to recover unpaid taxes from wealthy individuals with high incomes and significant tax debt. This effort has already recouped over $1 billion from tax evaders.
How much has the IRS recovered so far from this initiative?
As of July 2024, the IRS had recovered $1.1 billion from millionaires with delinquent tax debt and $172 million from 21,000 wealthy Americans who hadn’t paid their taxes since 2017.
What is the Direct File program?
The Direct File program is a new initiative that allows taxpayers to electronically file their taxes directly with the IRS for free. It was piloted in a few states and will be available nationwide for the 2025 tax season.
How much could the IRS recover by closing tax loopholes?
The IRS expects to raise over $50 billion in the next decade by closing major tax loopholes, such as “basis shifting,” a common method used by the wealthy to avoid taxes.
