The Internal Revenue Service (IRS) is cracking down on wealthy Americans who are allegedly avoiding $150 billion in taxes every year, according to IRS Commissioner Danny Werfel. The agency has admitted to struggling with auditing high-income individuals and blamed a lack of funding for the inadequate scrutiny. Over the past decade, audits of taxpayers earning more than $1 million annually have declined by over 80 percent, despite a 50 percent increase in the number of wealthy individuals. The IRS plans to use funding from the Inflation Reduction Act (IRA) to go after millionaires who owe taxes, but some Republicans have criticized these efforts, claiming they will burden small businesses.
The IRS is specifically targeting improper accounting of business jets by wealthy taxpayers. While businesses are allowed to deduct expenses associated with assets like aircraft as long as they are used for business purposes, personal use should be clearly demarcated. The agency has also set its sights on partnerships, as many wealthy individuals are allegedly shifting their incomes to these entities to avoid paying income taxes.
To aid in their efforts, the IRS plans to leverage artificial intelligence (AI) to assess tax evasions. Commissioner Werfel likened AI to night vision goggles, allowing them to be more precise in identifying high-risk areas of tax evasion.
However, a report by the U.S. Government Accountability Office (GAO) found that as taxpayer income levels rose, the IRS recommended more taxes per audit but closed fewer audits. The GAO recommended that the agency centralize its management of high-income and high-wealth audit programs and reassess its research efforts to understand the complexity of high-income returns.
In conclusion, the IRS is determined to crack down on wealthy Americans who are allegedly avoiding billions of dollars in taxes each year. With a boost in funding from the IRA, the agency plans to target millionaires who owe taxes and is focusing on business jet usage and partnerships as potential areas of tax evasion. By utilizing AI technology, the IRS hopes to identify high-risk cases more accurately. However, the agency must address the recommendations made by the GAO to improve its audit programs and research efforts.
