The Internal Revenue Service (IRS) has successfully collected over $1 billion from wealthy tax evaders, thanks to new funding from the Inflation Reduction Act. This significant milestone, announced on Thursday, marks a major victory in the IRS’s efforts to enforce tax compliance among high-income individuals.
New funding provided by the Inflation Reduction Act, passed by Democrats, has enabled the IRS to focus on 1,600 individuals with incomes exceeding $1 million who owed more than $250,000 in taxes. Since last fall, the agency has recovered over $1 billion from 1,200 people within this group, and the IRS anticipates this figure will continue to rise.
“This represents an important milestone in our fight against tax dodging by the wealthy,” said IRS Commissioner Danny Werfel. He emphasized that this success is a direct result of the enhanced resources and staffing made possible by the new funding.
For decades, the IRS struggled to ensure tax compliance among the wealthy due to significant funding cuts. These cuts severely limited the agency’s capacity to enforce tax laws effectively. The Inflation Reduction Act has reversed this trend, allowing the IRS to bolster its enforcement efforts.
The IRS’s new campaign specifically targets high-income individuals who have failed to pay their taxes. The agency identified approximately 1,600 taxpayers with incomes over $1 million who owed more than $250,000 each. This initiative has already resulted in the recovery of over $1 billion in unpaid taxes.
The collection process begins with a letter sent to the taxpayer’s home, giving them a set period to pay the back taxes or dispute the amount. If there is no response, the IRS follows up with more direct enforcement actions. This method has proven effective in recovering significant amounts of overdue taxes.
The IRS has also intensified its audits of wealthy taxpayers, corporations, and large business partnerships. This effort includes hiring more staff and utilizing artificial intelligence to identify and pursue tax evaders. Additionally, the agency is scrutinizing the personal use of corporate jets, a common area for tax avoidance among the wealthy.
Commissioner Danny Werfel and Treasury Secretary Janet Yellen have both highlighted the critical role of the Inflation Reduction Act in these efforts. “Our increased work in this area means these past-due tax bills from high-end taxpayers are no longer being left on the table,” Werfel said. He credited the new funding for enabling the IRS to enhance its resources and staffing to necessary levels.
Treasury Secretary Yellen echoed these sentiments, noting that the funding has reversed a decade-long decline in the IRS’s ability to enforce tax compliance. “The Inflation Reduction Act has allowed us to target high-income tax evaders more effectively and ensure that everyone pays their fair share under federal law,” Yellen stated.
The new funding has significantly improved the IRS’s operational capabilities. The agency has been able to hire additional staff and invest in advanced technology, which has been crucial in identifying and pursuing wealthy tax evaders. This has also led to improvements in taxpayer services, with the agency answering 1 million more calls this year compared to the previous tax season. Efforts to digitize the IRS’s 1 billion pieces of paper are also underway, further streamlining operations.
Earlier this year, the IRS launched a pilot version of its own tax filing service, known as Direct File. This program allowed Americans to file their returns directly with the IRS for free. Over 140,000 people used the service successfully, and the IRS plans to expand the program next year.
Despite these successes, the new IRS funding has faced fierce opposition from Republicans. They have criticized the funding as wasteful spending and launched a fear-mongering campaign suggesting that the average American would be targeted by the IRS. This campaign aimed to divert attention from the fact that the enforcement efforts are focused on the wealthiest 1% of Americans.
Republicans have managed to claw back $20 billion from the $80 billion originally allocated to the IRS under the Inflation Reduction Act. However, lawmakers supporting the funding argue that the results speak for themselves. “Democrats boosted IRS funding, and it’s already gotten back $1 BILLION from millionaire tax cheats,” said Senator Elizabeth Warren (D-Massachusetts). She emphasized that the funding is essential for ensuring tax compliance among the wealthy.
“We continue working to add staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law,” said Commissioner Werfel.
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