IRS Recovers $1.3 Billion in Unpaid Taxes from Wealthy Americans

The Internal Revenue Service (IRS) announced on Friday that it has successfully collected $1.3 billion in unpaid taxes from affluent Americans who either did not file their returns or failed to fully settle their tax obligations. This development, shared in coordination with the U.S. Treasury Department, reflects the agency’s intensified enforcement against tax evasion, an effort bolstered by funding from the 2022 Inflation Reduction Act.

This increase in IRS funding has sparked some controversy, particularly among Republican lawmakers who have incorrectly claimed that it would lead to the hiring of 87,000 new IRS agents aimed at auditing average consumers. In contrast, the IRS emphasizes that this financial support is being directed towards enhancing customer service, which suffered during the pandemic, as well as increasing audits for individuals with over $1 million in annual earnings and those who owe more than $250,000 in taxes.

Treasury Secretary Janet Yellen explained the initiative is part of a broader strategy to eliminate tax evasion and ensure that high-income earners fulfill their tax responsibilities. In a statement prepared for a speech in Austin, Texas, Yellen pointed out that the audit rate for millionaires saw an alarming 80% drop between 2010 and 2018. Furthermore, she noted that during the previous administration, audit scrutiny shifted largely towards individuals with incomes under $200,000, leaving high-income earners to evade taxes more easily.

In a striking statistic, Yellen highlighted that the top 1% of Americans was estimated to owe more than 20% of all unpaid taxes, placing an unjust burden on regular taxpayers. She disclosed that the IRS is now actively tracking down approximately 125,000 wealthy individuals who have not filed tax returns in several years. Through heightened enforcement efforts, about 21,000 of these individuals have filed their taxes in the past six months, contributing $172 million in payments.

These 21,000 taxpayers were the first to respond after the IRS notified them of their obligation to file, as revealed by a senior official from the Treasury during a conference call with reporters. The IRS anticipates recovering hundreds of millions more from the remaining 104,000 affluent individuals still yet to file their returns.

The agency remains prepared to utilize its enforcement powers against those who haven’t filed. Notably, since the initiation of this crackdown, approximately 80% of 1,600 millionaires with overdue tax payments have settled their debts, resulting in an additional $1.1 billion recovered by the Treasury. This figure has increased by $100 million since July, when the agency reported having already collected $1 billion from this group.

This ongoing effort by the Treasury and IRS aims to restore equity in the tax system, ensuring that all taxpayers, particularly those with the highest incomes, are held accountable. Yellen’s statements reflect a commitment to reversing the trends of reduced auditing and increasing fairness in tax collection.

As the IRS enhances its capabilities, it underscores its role in promoting compliance among high earners, who have historically benefitted from lower scrutiny compared to their lower-income counterparts. The agency’s actions, including increased communication with high-income taxpayers, signal a determination to rectify disparities in tax enforcement.

With ongoing challenges in maintaining efficient service for regular taxpayers, the IRS aims to create a more balanced and equitable tax system, essential for the integrity of the nation’s revenue collection efforts.