The Internal Revenue Service (IRS) is intensifying its efforts against tax evasion, particularly targeting the nation’s wealthiest. IRS Commissioner Danny Werfel revealed in a CNBC interview that millionaires and billionaires are evading taxes totaling over $150 billion annually. This tax gap significantly contributes to government deficits and creates imbalances in the tax system.
With new funding from Congress, the IRS has embarked on a comprehensive enforcement campaign focusing on individuals and entities with complex tax returns. This initiative comes after years of underfunding, which led to a drastic drop in audits, particularly for high-income taxpayers, despite a significant increase in their numbers.
Werfel emphasized the need for fairness in the tax system. He pointed out that the lack of resources at the IRS had made it challenging to effectively audit complex filings. The goal now is to ensure that all taxpayers, regardless of their income level or the complexity of their filings, contribute their fair share.
This move by the IRS has sparked criticism from some Republican members of Congress. They argue that the increased audits will unnecessarily burden small businesses and are skeptical about the revenue generation potential of these measures.
Despite the pushback, the IRS is moving forward with its plans. The agency received an $80 billion boost through the Inflation Reduction Act, although $20 billion of this funding was later retracted. The Treasury Department projects that enhanced IRS enforcement will generate an additional $561 billion in tax revenue between 2024 and 2034.
Early successes of the IRS’s new strategy include the collection of over $480 million in unpaid taxes from 1,600 millionaires. Furthermore, the IRS has launched a program to audit private jet owners and is using analytics tools and public databases to identify possible tax evasions.
Werfel also highlighted the use of artificial intelligence (AI) in IRS operations. AI assists in more accurately identifying returns with a high likelihood of evasion or errors, thereby making the audit process more efficient and fairer.
In light of these developments, businesses and individuals must navigate the evolving tax landscape with care and precision. This is where Ledgerive steps in, offering expert remote bookkeeping and tax services to ensure compliance and strategic financial management.
