By Gina Gatchell, Director
“During the previous administration, as audit rates on high-income taxpayers fell, the share of audits on taxpayers with incomes under $200,000 increased,” Yellen said in remarks to be delivered at an IRS service center in Austin, Texas. “In 2019, the top one percent of Americans was estimated to owe over one-fifth of unpaid taxes, leaving ordinary Americans to shoulder the burden.” – U.S. Secretary of the Treasury Janet L. Yellen’s comments during a site visit to the IRS in Austin, Texas.
Over the weekend the Internal Revenue Service (IRS) and the Department of the Treasury announced that $1.3b has now been collected from high-income, high-wealth nonfilers.
This latest collection stems from around 1600 millionaires who have or had previously, delinquent tax debt.
Of those 1,600 individuals, 80% have made a payment resulting in the latest total of $1,3b, with $100m collected since July – the point at which the IRS and the Treasury passed the $1b mark.
Notably this is not broken down into U.S. residents and U.S. expats[1].
How the IRS did it
The DC-based government agency’s funding via the Inflation Reduction Act passed under the Biden- Harris agenda in 2022 empowered the IRS to launch an initiative in February 2024 in pursuit of individuals who have failed to file a U.S. income tax return since 2017.
The previous agenda targeting such individuals had been in operation – albeit severely under-resourced – since 2016.
In contrast, the freshly backed February 2024 campaign has now reached a milestone through the process of automated matching.
This technique involves the IRS matching of income and other information filed by financial institutions and employers with the IRS, to unfiled tax returns.
Automated matching has been used for several decades by the IRS to identify and resolve discrepancies between third party documentation filed with the agency and corresponding data on an income tax return and to identify those who have not filed their income tax return at all.
Funding the IRS is a political football
Funding under the current administration is set to change under a new Republican administration with the residual of $60b budget allocated to the Inflation Reduction Act set to be clawed back under a new government.
In context, of the $60b allocated to the IRS under the Act, $10b is scheduled to have been used by the end of the current fiscal year, 30 September 2024. That leaves US $50b available to rescind. Should this occur the federal budget deficit is forecast to increase by $100b over a decade due to lost tax revenue[2].
This campaign, ‘high income non-filer’, is one of 47 currently active campaigns that the IRS Large Business & International Division is running.
[1] IR-2024-233, Sept. 6, 2023
[2] Reuters, September 7, 2024
