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Treasury, IRS Collect $1 Billion in Back Taxes from Millionaires

Treasury and IRS Collect Over $1 Billion in Back Taxes from High-Income Earners in One Year

By Mackenzie Crow

7/11, 05:13 EDT
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Key Takeaway

  • The IRS collected over $1 billion in past-due taxes from high-income individuals, marking a significant enforcement milestone.
  • Enhanced IRS funding from the Inflation Reduction Act aims to generate up to $851 billion through 2034 by targeting wealthy tax evaders.
  • Audit rates for millionaires have increased significantly, highlighting a shift in IRS focus and resource allocation.

IRS Collects $1 Billion in Back Taxes

The U.S. Department of the Treasury and the IRS announced a significant achievement on Thursday, revealing that they have collected over $1 billion in tax debt from high-income individuals over the past year. This milestone is part of a broader initiative to enhance tax enforcement and ensure compliance among wealthy taxpayers. The IRS's efforts have been bolstered by tens of billions in new funding, which has allowed the agency to expand its scrutiny of individuals earning more than $1 million annually and owing more than $250,000 in recognized tax debt.

Treasury Secretary Janet Yellen highlighted the success of these efforts, stating, "The IRS has collected $1 billion from millionaires and shown that it can successfully launch strategic new initiatives and achieve the greatest return on investment." This achievement underscores the agency's ability to effectively utilize its resources to target high-income earners who have previously evaded their tax obligations.

Impact of Inflation Reduction Act

The infusion of funding for the IRS, enacted through the Inflation Reduction Act in 2022, has been a game-changer for the agency. IRS Commissioner Danny Werfel emphasized the stark contrast in the agency's capabilities before and after the funding boost. "During the past decade, the IRS didn’t have the resources or staffing to pursue high-income earners who our compliance team knew owed taxes," Werfel explained. The audit rate for taxpayers earning $1 million or more was a mere 0.7% in 2019, compared to 7.2% in 2011, highlighting the impact of budget constraints on enforcement efforts.

The IRS's enhanced enforcement capabilities have also been scrutinized by the U.S. Government Accountability Office and the U.S. Treasury Inspector General for Tax Administration. These agencies have examined the IRS's audit selection process and identified areas for improvement, such as reducing the no-change rate among audits of high-earning filers. Werfel acknowledged these findings, stating, "Our goal is always to eliminate the risk of a zero-balance-due audit."

Strategic Initiatives and Future Plans

In addition to targeting high-income individuals, the IRS has launched several initiatives aimed at closing tax loopholes and increasing revenue. Last month, the IRS and Treasury announced plans to address a "major tax loophole" used by large, complex partnerships, which could raise $50 billion in tax revenue over the next decade. Other initiatives include pursuing individuals and businesses that improperly deduct personal flights on corporate jets and collecting back taxes from delinquent millionaires.

The IRS's modernization efforts, funded by the Inflation Reduction Act, are expected to generate substantial returns. The agencies estimate that sustained funding could yield up to $851 billion through 2034. This projection underscores the potential long-term benefits of investing in tax enforcement, technology, and data.

Management Quotes

  • Janet Yellen, Treasury Secretary:

    "The IRS has collected $1 billion from millionaires and shown that it can successfully launch strategic new initiatives and achieve the greatest return on investment."

  • Danny Werfel, IRS Commissioner:

    "During the past decade, the IRS didn’t have the resources or staffing to pursue high-income earners who our compliance team knew owed taxes."
    "The difference is really like night and day."
    "Our goal is always to eliminate the risk of a zero-balance-due audit."