IRS collects $1 billion in back taxes from wealthy taxpayers

WASHINGTON – The IRS announced Thursday that it has collected $1 billion in back taxes from high-wealth tax fraud — a milestone aimed at showing how the agency is making use of the money it received as part of the Biden administration’s signature move. climate, health and fiscal package sanctioned into law in 2022.

Part of the push for public awareness about high wealth tax collection is a growing recognition from agency employees that a potential Republican takeover of the White House and Congress could mean huge future budget cuts for the IRS. Showing the public how much work the IRS is doing is meant to give the much-maligned agency a more sympathetic image.

As part of that effort, last year the IRS launched a series of initiatives aimed at going after wealthy individuals who have failed to pay their tax debts. The IRS says the campaign is focused on taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt.

“President Biden’s Reducing Inflation Act is increasing tax fairness and ensuring that all wealthy taxpayers pay the taxes they owe, just as working families do,” Treasury Secretary Janet Yellen said in a statement.

In June, Treasury proposed a rule and guidance that includes plans to essentially prevent “partnership basis shifting” – a process by which a company or person can transfer assets between a series of related parties to avoid paying taxes. That could raise more than $50 billion in revenue over the next decade, Treasury said.

Other initiatives announced last year included a search for people and companies that improperly deducting personal flights on corporate jets and collecting back taxes from delinquent millionaires.

Eugene Steuerle, a fellow and co-founder of the Urban-Brookings Tax Policy Center, said that if the IRS “can show that it is having a positive impact and that it is not impacting average American taxpayers, there would be more public support for this activity and the agency.”

“Any increase in government investigations feels like an intrusion,” Steuerle said. He added that if the IRS can show taxpayers how it is conducting its investigations, the general public may be less fearful of an audit.

Meanwhile, Republicans have threatened a series of cuts to the IRS, sometimes successfully.

House Republicans included a $1.4 billion reduction for the IRS in the debt ceiling and budget cuts package approved by Congress in the summer of 2023. The deal included a separate agreement to take $20 billion from the IRS over the next two years and divert that money to other non-defense programs.

House Republicans’ Fiscal Year 2025 Subcommittee on Financial Services and General Government Proposal in June proposes new cuts to the IRS in 2025and would cut funding for the Direct File program that is being expanded to allow Americans to file their taxes directly with the IRS.

Demian Brady, vice president of research at the National Taxpayers Union Foundation – says the IRS still targets non-high-net-worth partnerships for audits.

“It should also be noted that nearly two-thirds of audits beginning in 2023 were on those earning less than $200,000,” Brady said.