In the latest effort to show it is using more congressional funding, the Internal Revenue Service said Friday it is shifting its enforcement efforts to high-income, partnerships and large corporations.
The agency will also ensure that audit rates do not increase for those earning less than $400,000 a year — echoing President Joe Biden’s pledge not to raise taxes on those in the lower bracket — and add additional protections for low- and moderate-income taxpayers. the earned income tax credit.
“This new compliance push makes good on the promise of the Inflation Reduction Act to ensure that the IRS holds our wealthiest filers accountable to pay the full amount they owe,” said IRS Commissioner Danny Werfel, which states that underfunded years bring the lowest. audit rate of wealthy filers in agency history.
The additional IRS funding contained in the Inflation Reduction Act has been a political football since Democrats pushed the legislation through Congress last year. The law gives the cash-strapped agency nearly $80 billion over 10 years to increase enforcement and improve customer service.
It quickly hired thousands of new representatives to help with the 2023 tax filing season, allowing the agency to answer more calls, cut phone wait times, serve more personal taxpayers and clear the backlog of unprocessed 2022 individual tax returns without errors. It also modernized its decades-old technology.
But congressional Republicans, as well as leading 2024 GOP presidential candidates, argue that a revitalized IRS would use its enforcement powers against hardworking Americans. They often say the IRS plans to use the money to hire 87,000 agents to keep middle-class taxpayers busy.
House GOP lawmakers succeeded this spring in revoking more than $20 billion in Inflation Reduction Act funding as part of a deal to raise the debt ceiling. And it hopes to cut even more as part of the fiscal 2024 federal spending package currently being discussed in Congress.
The agency said it plans to use improved technology and artificial intelligence to help it better detect tax fraud, identify emerging compliance threats and improve case selection. audit. It will also prosecute promoters who abuse tax laws.
“We will increase our efforts to go after those who pose the greatest risk to our nation’s tax system, whether it is the wealthy who are looking to avoid paying their fair share or the promoters who are aggressively selling the abusive schemes,” Werfel said.
It will expand its focus to taxpayers earning more than $1 million with more than $250,000 in recognized tax debt. The agency, which recently collected $38 million from more than 175 high-income earners, contacted about 1,600 taxpayers who fall into this category and owe hundreds of millions of dollars.
At the end of September, the IRS will begin investigating 75 of the largest partnerships, including hedge funds, real estate investment partnerships, large law firms and others. It will use artificial intelligence to identify possible failures to comply with partnership tax, international tax and general income tax and accounting. And early next month, it will reach about 500 partnerships with differences in their balances.
In the coming fiscal year, which begins in October, the agency plans to expand its efforts involving digital currency compliance, taxpayers with foreign bank accounts who do not file the required forms and construction contractor building shell subcontracting companies.