The Internal Revenue Service (IRS) has made continued progress in expanding enforcement efforts related to high-income individuals, large corporations, and complex partnerships as part of wider efforts to transform the agency using Inflation Reduction Act (IRA) resources.
In addition to earlier announcements focused on further improving taxpayer service during the upcoming 2024 filing season, the IRS has focused IRA resources on strengthening enforcement to pursue complex partnerships, large corporations, and high-income, high-wealth individuals who do not pay overdue tax bills.
The IRS is continuing to pursue millionaires that have not paid hundreds of millions of dollars in tax debt, with an additional $360 million collected on top of the $122 million reported in late October. The IRS has now collected $482 million in ongoing effort to recoup taxes owed by 1,600 millionaires with work continuing in this area. When combined with earlier successes, the IRS has recovered more than half a billion dollars from millionaires. The IRS has also advanced efforts to pursue people using partnerships to avoid paying self-employment taxes as well as other enforcement priorities announced in the fall of 2023.
The IRS is working to ensure large corporate, large partnership and high-income individual filers pay the taxes they owe. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to hide their income and evade paying taxes owed. The IRS is now taking swift and aggressive action to close this gap.
The IRS has ramped up efforts to pursue high income, high wealth individuals who have either not filed their taxes or failed to pay recognized tax debt, with dozens of Revenue Officers focused on these high-end collection cases. These efforts are concentrated among taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt. In an initial success, the IRS collected $38 million from more than 175 high-income earners. The IRS last fall began contacting about 1,600 new taxpayers in this category that owe hundreds of millions of dollars in taxes. The IRS has assigned over 900 of these 1,600 cases to revenue officers, with over $482 million collected so far. This brings the total recovered from millionaires through these new initiatives to $520 million.
Also, the IRS has identified ongoing discrepancies on balance sheets involving partnerships with over $10 million in assets, which is an indicator of potential non-compliance. Taxpayers filing partnership returns are showing millions of dollars in discrepancies between end-of-year balances compared to the beginning balances the following year. The number of these discrepancies has been increasing, with many taxpayers not attaching required statements explaining the difference. The IRS announced an initiative to address the balance sheet discrepancy in September and as of the end of October had sent 480 compliance alerts.
As part of the agency’s increased focus on the tax issues applicable to partnerships and partners, the IRS has been increasing compliance to ensure that Self-Employment Contributions Act (SECA) taxes are being properly reported and paid by wealthy individual partners who provide services and have inappropriately claimed to qualify as “limited partners” in state law limited partnerships (such as investment partnerships) not subject to SECA tax. In contrast to wage earners whose employment taxes (Federal Insurance Contributions Act/FICA) are deducted from their paychecks, self-employed individuals are required to report and pay their SECA taxes on their federal income returns. The IRS efforts to date include more than 80 audits of wealthy individuals.
The IRS offered positions to more than 560 new skilled accountants in November and December, key positions in ramping up work to pursue high-wealth individuals, complex partnerships, and large corporations that do not pay taxes owed. Importantly, the IRS has been modernizing its hiring processes and holding more direct hiring events to better compete with the private sector and quickly bring top talent on board.
The IRS is focused on helping taxpayers get it right the first time—claiming the credits and deductions they are eligible for and avoiding back-and-forth with the agency when errors arise. To help taxpayers get it right, the IRS is working toward taxpayers being able to seamlessly interact with the agency in the ways that work best for them on the phone, in-person, and online. The IRS is expanding in-person service and meeting taxpayers where they are, particularly those in underserved and rural communities.
Taxpayer Assistance Centers, which provide in-person support to local communities across the country, will collectively offer more than 8,000 more hours of in-person assistance than they did last filing season. On the technology side, the IRS is modernizing decades-old technology to drive the agency’s efforts to provide world class customer service and protect taxpayers’ data.
