IRS Issues Stern Warning to High-Income Tax Filers

The IRS (Internal Revenue Service) recently announced it will crack down this year on those who try to get away with paying less on their taxes, specifically high-income individuals and giant corporations that should be paying a lot more.

In response to this new information, the IRS released a statement explaining that it plans to make some big changes in 2024: The federal organization will use AI to identify corporations that are avoiding paying taxes.

While some people don’t file at all, the majority of America’s billionaires and millionaires are sneakier than that. They do file as everyone else does, but they intentionally leave out significant portions of their income or add extra deductions that never occurred.

On a smaller scale, some people take advantage of the deduction system by adding private flights on corporate jets and making large charitable donations to their own foundations. But there are truly dozens of ways for high-income individuals to avoid taxes, such as keeping their money in stock options or IRAs or investing in the oil or gas industry, which can all but eliminate their excessive incomes through tax breaks.

While the IRS can’t do much to force the ridiculously wealthy and giant corporations to stop using legal tactics to avoid taxes, it can take a harder line on those who are using illegal or even controversial practices.

Werfel explained, “The IRS is ramping up our scrutiny, and I think that will inevitably result in more compliance.”

This led Werfel to state that “many corporations are sloppy with their bookkeeping” when it comes to these jets.

This move has resulted in the IRS beginning to send out letters to these wealthy Americans. According to the agency, those who make anywhere from $400,000 and up — and even $1 million and up — annually and don’t file their tax returns will be targeted first.

Normally, those who do not file their taxes receive a penalty of 5% of the amount owed, per month, for each month the filing is late. However, this penalty is capped at 25% of the total tax bill. A penalty on interest is also attached.

Now, however, Werfel is hoping to change that. “If someone hasn’t filed a tax return, this is the time to make it right,” Werfel stated.

Of course, ensuring that America’s billionaires and corporations pay their fair share is a great first step, but the IRS has other plans to improve its reputation.

There are certainly some free tax platforms, such as TurboTax, but once someone’s income or investments get even moderately more complicated, they are forced to pay an additional fee.

Werfel says, “People are telling us that they found it to be quick and easy, and everyone certainly loves that it’s free.”

According to the IRS, this update has to do with verifying returns prior to filing, and asking users important details to get this process done.

This was because there wasn’t an easy way for users to accurately import verification information from past tax years. Normally, other tax software allows people to add this information manually, if it doesn’t do it for them automatically.

Thanks to this update, the IRS is confident that these common errors won’t appear now when Americans utilize their Direct File program.

Therefore, those who are considered gig or self-employed workers will not be able to use Direct File.

He told AP that the focus for 2024 is “being accessible, answering the phones, keeping our walking centers open, and updating our website so that people can do things more with the IRS without ever leaving their smartphone or their tablet.“

That’s after hiring 4,000 new employees in 2022, and they still plan to hire tens of thousands more in the coming years. But while this influx of employees will help the IRS crack down on tax evaders and be more readily available to all Americans throughout tax season, it will also cost the federal government an almost unbelievable $80 billion.

For those who don’t file or choose to lie and attempt to skirt some of their taxes, the IRS will be coming for you this year, and they have the money to do so.

According to these conservatives, the IRS is using their new hires to go after regular, honest people. “We are not,” Werfel explained. “We are hiring phone assisters armed only with phone headsets. We’re hiring accountants armed only with calculators.”

Most of this criticism has come from conservatives because Democratic lawmakers have tried to give more money to the struggling agency. In some ways, these Republicans have been successful, as they’ve gotten Democrats to agree to a $20 billion IRS cut.

In 2019, only 0.7% of taxpayers earning more than $1 million were audited. By comparison, in 2011, this rate was 7.2%. As the IRS is working to pay closer attention to the wealthy, this rate could rise.