The IRS says its tougher tax enforcement is already paying off and that the agency is making more high-end tax cheats pay up.
A month after announcing it would crack down on 1,600 millionaires who were far behind on their taxes, the Internal Revenue Service said Friday it has collected $122 million from 100 of these cases.
That’s on top of $38 million in back taxes the IRS has already collected from 175 millionaires. It brings the recent rake of back taxes from rich households to $160 million, IRS Commissioner Danny Werfel said.
“The funds that we’ve collected should give you a fairly good idea of how much money is on the table for us,” Werfel told reporters, highlighting how the IRS is using money from the Inflation Reduction Act.
The tax and climate package enacted last summer earmarked billions for the IRS to overhaul its operations, improve customer service and toughen enforcement against super-rich taxpayers and major businesses.
In some cases, the recouped money comes from restitution or guilty pleas in criminal cases, the IRS and Treasury Department said Friday. That includes a $15 million restitution order for a person who falsely claimed that the personal expenses involved in building a fancy mansion replete with tennis, basketball and bocce courts were deductible business expenses.
Another case involved a person who skimmed more than $670,000 from a business by filing a false tax return. The individual allegedly spent $502,000 on gambling, the IRS said.
There was a $688 billion gap between the amount of taxes owed and the amount of taxes actually paid during tax year 2021, according to recent IRS estimates.
IRS officials also have their sights on corporate tax money.
Starting next year, the agency is initiating 60 audits on major corporations, Werfel said. These businesses have an average $24 billion in assets and are averaging $526 million in yearly taxable income, he noted.
Starting next month, the IRS also is going to send out approximately 150 alerts to U.S.-based subsidiaries of foreign companies. The concern is these subsidiaries are not reporting the full amount of income they generate in America — which is also subject to taxation in America.
The alerts to subsidiaries are meant “to remind them of their U.S. tax obligations and to incentivize taxpayer self-correction,” Werfel said.
That’s on top of the IRS announcement last month that it was planning 75 audits at large partnerships, including large law firms and hedge funds.
Passed last summer, the Inflation Reduction Act authorized $80 billion to the IRS over a decade. It passed along party lines, when Democrats controlled Congress. The sum decreased to $60 billion after White House debt ceiling negotiations in the spring with Republicans.
Werfel’s update comes while a government shutdown looms next month and the role of speaker for the House of Representatives is vacant. “Our challenges are made even more stark by ongoing budget uncertainty,” he said.