Inflation Reduction Act Resources Helped Collect $1.3B from Tax Delinquents

On September 6, the Treasury Department and the Internal Revenue Service (IRS) announced a substantial financial recovery of $1.3 billion from high-income individuals as a result of new initiatives introduced under the Inflation Reduction Act. This marks a significant stride in tax collection efforts aimed at wealthy non-filers.

The IRS reported recovering $172 million in taxes from wealthy individuals as part of a program initiated in February. This program specifically targets approximately 125,000 individuals who have not filed tax returns since 2017, despite having reported incomes ranging from $400,000 to over $1 million.

In a remarkable addition, nearly 80% of 1,600 millionaires who owed taxes have made payments since the rollout of a new initiative in the fall of 2023. This effort has contributed to a total recovery of $1.1 billion, which is an increase of $100 million from figures released in July.

According to the Treasury, the funding provided by the Inflation Reduction Act played a crucial role in making these collections possible. Previously, the IRS struggled to pursue these cases due to insufficient resources.

These latest developments were shared during a speech by Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel at the IRS campus in Austin, Texas. In her remarks, Yellen emphasized the importance of the Inflation Reduction Act in enabling significant investments to combat tax evasion. “The IRS previously lacked the necessary resources to go after wealthy non-filers. Now, we are making substantial progress,” she remarked.

The IRS’s non-filer initiative had been inconsistent since 2016, during the Trump administration, largely due to “severe budget and staff limitations.” However, the passage of the Inflation Reduction Act has provided the necessary support to enhance these efforts.

“Between 2010 and 2018, the audit rate for millionaires saw a remarkable decline of 80%,” Yellen noted. “During that time, as the scrutiny on high-income taxpayers decreased, the IRS turned its attention instead to auditing individuals earning less than $200,000.” This redirection of resources left the wealthiest segments less audited and, consequently, less accountable.

Yellen highlighted a staggering statistic from 2019, stating that the top one percent of earners in the United States was estimated to owe over one-fifth of all unpaid taxes, burdening ordinary Americans with the shortfall. This evident disparity has propelled the IRS to ramp up its collection activities targeting those most able to pay what they owe.

This robust collection initiative reflects a larger commitment to ensure equity in tax enforcement, moving towards a more balanced approach where all individuals, regardless of income level, fulfill their tax obligations.

The progress made thus far indicates a turning point in the IRS’s ability to enforce tax laws among wealthier individuals, which could pave the way for a fairer financial landscape in the United States.