The U.S. Department of the Treasury and the IRS recently announced a significant achievement of collecting over $1 billion in tax debt from high-income individuals over the past year. This accomplishment comes as a result of the IRS’s plans to expand its focus on individuals earning above $1 million annually with more than $250,000 in recognized tax debt.
During a press call, Treasury Secretary Janet Yellen commended the IRS for successfully collecting $1 billion from millionaires and emphasized the strategic launch of new initiatives that have proven to deliver a high return on investment. This achievement highlights the effectiveness of allocating additional resources towards enforcing tax compliance among high-income earners.
With the infusion of tens of billions in new funding, the IRS estimates that its investments in enforcement, technology, and data could yield up to $851 billion through 2034. This projected return demonstrates the potential impact of sustained funding on increasing tax collections from wealthy individuals and achieving greater overall compliance.
Despite the success in collecting tax debt from high-income individuals, the audit rate for taxpayers earning $1 million or more was only 0.7% in 2019, compared to 7.2% in 2011. This significant decrease in audit rates raises questions about the effectiveness of the IRS’s enforcement efforts and the need for continued scrutiny of high-income earners.
While the IRS’s increased focus on high-income taxpayers has shown promising results, there has been criticism from congressional Republicans about the allocation of resources and the impact of recent funding. IRS Commissioner Danny Werfel acknowledged the challenges faced by the IRS in pursuing high-income earners due to previous budget constraints and staffing shortages.
In response to audits conducted by the U.S. Government Accountability Office and the U.S. Treasury Inspector General for Tax Administration, the IRS has been working to improve its audit selection process and address issues such as the elevated no-change rate among audits of high-earning filers. By refining its enforcement strategies, the IRS aims to eliminate the risk of zero-balance-due audits and ensure greater compliance among wealthy individuals.
The recent announcement of the IRS’s success in collecting tax debt from high-income individuals marks a significant milestone in the agency’s efforts to enhance tax enforcement and maximize revenue collection. With continued funding and strategic initiatives, the IRS aims to strengthen its enforcement capabilities and hold high-income taxpayers accountable for their tax obligations.