The IRS is prioritizing its efforts to target high-income and high-wealth individuals as part of its broader strategy to close the nation’s tax gap.
That's according to the agency’s 2024 Agency Financial Report last week, which detailed its plans to expand audits, leverage advanced analytics, and increase enforcement staffing in the coming year in a bid to recover billions in unpaid taxes.
In the wide-ranging report, IRS Commissioner Daniel Werfel said a central theme in the agency's work over the past year has been "[i]dentifying the growing number of taxpayers with complex returns — including certain high-income and high-wealth individuals, large corporations, and complex partnerships — who are shielding income to evade their tax responsibility."
The IRS said its efforts to hold the wealthiest taxpayers accountable – boosted by funding from the Inflation Reduction Act of 2022 – have already yielded significant results. Among other accomplishments, the agency said its High Wealth, High Balance Due Taxpayer Field Initiative has recovered over $1 billion from taxpayers with incomes exceeding $1 million and recognized tax debts of more than $250,000. Alongside that initiative, the agency said it opened audits on 76 of the largest US partnerships, including hedge funds and real estate partnerships, and proactively reached out to ensure compliance among high-income nonfilers.
Among other actions against nonfilers with large incomes in fiscal year 2024, the agency sent over 25,000 compliance letters to individuals earning more than $1 million annually and more than 100,000 letters to those earning between $400,000 and $1 million. It also issued fresh guidance to close partnership tax loopholes that it said were improperly exploited, and created a specialized team in its Office of Chief Counsel to further address abusive tax practices.
For the fiscal year 2025, the IRS plans to sustain and expand its enforcement initiatives. Its key strategic priorities include improving case selection through enhanced data analytics and targeting audits at large corporations, complex partnerships, and high-wealth individuals.
"This work is directly in line with the IRS’s vision to minimize attempts at tax evasion by complex filers. The IRS estimates that approximately $63 billion, or 9% of the gross tax gap, is due to nonfilers," the report read.
Amid those aggressive measures, the IRS has reassured small businesses and households earning $400,000 or less that they will not see increased audit rates compared to historical levels.
“The IRS is committed to ensuring high-income individuals, large corporations, and complex partnerships pay what they legally owe,” Werfel said.
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