50+ Years of Combined Experience in Tax & Accounting Services

February 22, 2024 - Reading time: 3 minutes

The Internal Revenue Service (IRS) has recently reported that tax evasion by the wealthiest Americans is costing the government more than $150 billion annually.

This staggering figure contributes to growing deficits and raises concerns about fairness in the current tax system, according to IRS Commissioner Danny Werfel.

In response to this issue, the IRS has launched a wide-ranging crackdown on wealthy individuals, partnerships, and large companies. With new funding from Congress, the agency is now targeting complex returns and rooting out tax evasion to ensure that every taxpayer contributes their fair share. Werfel stated that the "tax gap," which represents the difference between what is owed versus what is paid, has been significantly impacted by millionaires and billionaires who either don't file or underreport their income.

Over the years, a lack of funding at the IRS hindered its ability to carry out audits, particularly for complex returns that require more resources. Audits on taxpayers making over $1 million per year dropped by over 80% during the last decade, while the number of individuals earning this income rose by 50%.

To address these issues and promote a fairer system, Werfel emphasized the need for increased investment in IRS staffing, technology, and resources. This would enable the agency to accurately determine what is owed from taxpayers, regardless of their financial status or complexity of returns.

However, some Republicans in Congress have criticized the expanded enforcement efforts by the IRS, arguing that they will burden small businesses with unnecessary bureaucracy and yield minimal revenue gains. Despite this opposition, the Treasury Department estimates that greater IRS enforcement will result in an additional $561 billion in tax revenue between 2024 and 2034.

In recent efforts to collect unpaid taxes from millionaires, the IRS identified over 1,600 individuals who failed to pay at least $250,000 each in assessed taxes. The agency has already collected more than $480 million from this group and plans to continue these audits.

Additionally, Werfel highlighted private jet owners as another area where tax evasion may be prevalent. Using public databases of private-jet flights and analytics tools, the IRS is identifying tax returns with a high likelihood of evasion and launching dozens of audits on companies and partnerships that own jets. This could lead to further audits of wealthy individuals who claim significant tax deductions from corporate jets.

Lastly, Werfel pointed out limited partnerships as another potential source of tax evasion, with some wealthy individuals shifting their income to these business entities in an attempt to avoid income taxes. The IRS has launched the Large Partnership Compliance program, examining complex partnership returns and using artificial intelligence to better identify high-risk areas for evasion or errors.

Tax evasion by millionaires and billionaires is a significant issue that impacts government deficits and contributes to an unfair tax system.

DW Staff

David Lintott is the Editor-in-Chief, leading our team of talented freelance journalists. He specializes in covering culture, sport, and society. Originally from the decaying seaside town of Eastbourne, he attributes his insightful world-weariness to his roots in this unique setting.