IRS Collects More Than $500M from Fraudulent Millionaires

By: Georgia | Published: Jan 19, 2024

The Internal Revenue Service (IRS) has successfully collected more than $500 million in back taxes from delinquent millionaires.

This comes as the IRS intensifies its enforcement efforts toward tax compliance among high-earning individuals and businesses.

Breakdown of Recovered Taxes

The IRS’ recent enforcement activities have yielded substantial results. Officials reported collecting an additional $360 million from millionaire households with tax debts exceeding $250,000.

Advertisement
Close-up of an individual's hands counting a stack of US dollar bills. The person's hands are placed over a wooden desk, with more cash and some blurred paperwork visible on the surface

Source: Tima Miroshnichenko/Pexels

MarketWatch reports that this follows an earlier announcement in October, where the IRS disclosed having reclaimed $160 million from wealthy households. Cumulatively, these efforts have brought in a total of $520 million, demonstrating a strong return on recent investments in tax enforcement.

2022 Upgrade Boosts IRS Enforcement

The IRS’ enhanced capability to enforce tax laws on high-level delinquents has been significantly strengthened by a system upgrade in 2022, as reported by MarketWatch.

Advertisement
The photograph shows a low-angle view of the Internal Revenue Service (IRS) Building sign in the foreground, with the classical architecture of the IRS office building in the background

Source: Getty Images

This upgrade has enabled the agency to focus more effectively on businesses and superwealthy individuals who have been evading taxes. Danny Werfel, IRS Commissioner, highlighted this development, saying, “We are seeing significant early indicators that our increased scrutiny … is having immediate impact.”

Funding from the Inflation Reduction Act

The Inflation Reduction Act of 2022 has played a pivotal role in building up the IRS’ enforcement capabilities.

Advertisement
An opulent room with classical decor, featuring a grand piano on a polished wooden floor. The room is adorned with gold-framed landscape paintings, luxurious golden drapes, and a crystal chandelier that adds a touch of grandeur

Source: Miikka A./Unsplash

MarketWatch details that the act authorizes $80 billion for the IRS over a decade, with a significant portion allocated to enhance enforcement on corporations, partnerships, and affluent households. However, there’s uncertainty regarding a portion of this funding due to political negotiations that might redirect $20 billion to other areas.

Audit Rate Commitment for Households Earning Less Than $400K

Commissioner Werfel and the Biden administration have pledged to maintain the current audit rates for households earning less than $400,000 per year, as reported by MarketWatch.

Advertisement
Overhead view of a person sitting at a dark table managing finances. They are holding a stack of US dollar bills in one hand and have a notebook with handwritten notes open in front of them. To the left, a large calculator with digital display is visible, indicating active financial calculations

Source: Kuncheek/Pexels

This pledge comes amid negotiations with House Republican negotiators to redirect $20 billion of IRS funding.

Challenges and Future Funding Questions

The Associated Press reports that the IRS faces challenges regarding long-term funding, alongside immediate concerns. Commissioner Werfel emphasized the need for consistent funding to sustain their enforcement and customer service improvements.

A man, identified as Mr. Werfel, sits at a testimony table in a hearing room. He is centered in the frame, with a microphone in front of him and a nameplate bearing 'MR. WERFEL.' Behind him is the ornate, semi-circular architecture of the hearing room

Source: Getty Images

He said, “For this progress to continue, we must maintain a reliable, consistent annual appropriation for our agency, as well as keeping Inflation Reduction Act funding intact.”

Advertisement

The Threat of a Government Shutdown During Tax Season

MarketWatch reveals that as the 2024 tax season approaches, the IRS faces a potential government shutdown, creating unique challenges.

A focused view on tax preparation with a U.S. Individual Income Tax Return Form 1040 prominently displayed among other tax documents on a green surface. Wooden alphabet blocks spelling out 'TAX' are stacked on top of golden coins

Source: Nataliya Vaitkevich/Pexels

Commissioner Werfel warned, “Shutdowns are highly disruptive.” He further explained, “Encountering one now would increase the risk that we don’t have as smooth a filing season as we intend to have.”

Advertisement

IRS Intensifies Investigations into Major Financial Partnerships

The AP reports that the IRS, boosted by the Inflation Reduction Act funding, has launched 76 examinations into large U.S. partnerships, including hedge funds and law firms.

The entrance to the Internal Revenue Service building is framed by a stone archway with the inscribed words 'INTERNAL REVENUE SERVICE' prominently displayed above a grid of dark window panes

Source: Getty Images

Commissioner Werfel highlights the importance of this initiative, stating, “It’s clear the Inflation Reduction Act funding is making a difference for taxpayers.”

Advertisement

Nearly Half a Billion in Back Taxes Recovered

With the recent collections, the IRS has now recouped nearly half a billion dollars in back taxes from wealthy individuals, as reported by AP.

A white Bentley convertible parked in front of a contemporary building with large windows and stone accents. The luxury car features a beige leather interior, distinctive round headlights, and the iconic Bentley logo on the front grille

Source: Bradley Pisney/Unsplash

This substantial sum is a direct result of the Inflation Reduction Act, which has significantly enhanced the IRS’ enforcement capabilities. However, the agency is preparing for more severe funding cuts, as previously agreed upon by the White House and congressional Republicans.

Advertisement

Dealing with Budget Cuts and Future Funding

Facing imminent budget cuts, the IRS is preparing to strategically manage its resources. The AP reveals that despite the reduction of $20 billion in funding, Commissioner Werfel is confident that the current budget will not impact the agency’s efforts until later years.

A street-level view showing the engraved signage of 'INTERNAL REVENUE SERVICE' on the exterior of a building with classical architectural details. In the foreground, a traffic li ght shows a green signal

Source: Getty Images

He stated, “The impact of the rescission that’s being discussed as part of the current budget will not impact our efforts until the later years.”

Advertisement

Werfel's Optimism for Future IRS Funding

The AP notes that Commissioner Werfel remains optimistic about the future of IRS funding.

Daniel Werfel stands at a podium bearing the seal of the Internal Revenue Service. He is addressing an audience, with multiple flags in the background, including the American flag and the Department of the Treasury flag

Source: Getty Images

He hopes that the positive impact of the Inflation Reduction Act funding will encourage policymakers to restore IRS funding in the future. “My hope is that as we demonstrate the positive impact that IRA funding is having for all taxpayers, that there will be a need and a desire amongst policymakers at that time to restore IRS funding so that we can continue the momentum that’s having a very positive impact,” he said.

Advertisement

The Impact of Enhanced IRS Technology on Tax Compliance

In addition to the intensified enforcement efforts, the IRS has revealed that there has been a significant focus on upgrading its technology systems.

A wide-angle view of the imposing Internal Revenue Service building in Washington D.C, the building stands under a bright blue sky with a few scattered clouds. Pedestrians can be seen walking by on the sidewalk

Source: Wikimedia Commons

These enhancements are aimed at improving efficiency and aiding in the detection of tax evasion among high earners.

Advertisement