IRS plans crackdown on 1,600 millionaires to collect back taxes

The Internal Revenue Service (IRS) in the U.S. announced on Friday it is launching an effort to aggressively pursue 1,600 millionaires and 75 large business partnerships that owe hundreds of millions of dollars in past due taxes.

IRS Commissioner Daniel Werfel said that with a boost in federal funding and the help of artificial intelligence tools, the agency has new means of targeting wealthy people who have “cut corners” on their taxes.

“If you pay your taxes on time it should be particularly frustrating when you see that wealthy filers are not,” Werfel told reporters in a call previewing the announcement. He said 1,600 millionaires who owe at least $250,000 each in back taxes and 75 large business partnerships that have assets of roughly $10 billion on average are targeted for the new “compliance efforts.”

Werfel said a massive hiring effort and AI research tools developed by IRS employees and contractors are playing a big role in identifying wealthy tax dodgers. The agency is making an effort to showcase positive results from its burst of new funding under President Joe Biden’s Democratic administration as Republicans in Congress look to claw back some of that money.

“New tools are helping us see patterns and trends that we could not see before, and as a result, we have higher confidence on where to look and find where large partnerships are shielding income,” he said.

A team of academic economists and IRS researchers in 2021 found that the top 1% of U.S. income earners fail to report more than 20% of their earnings to the IRS.

The newly announced tax collection effort will begin as soon as October.

“We have more hiring to do,” Werfel said. “It’s going to be a very busy fall for us.”

The federal tax collector gained the enhanced ability to identify tax delinquents with resources provided by the Inflation Reduction Act, which Biden signed into law in August of 2022. The agency was in line for an $80-billion infusion under the law, but that money is vulnerable to potential cutbacks by Congress.

House Republicans built a $1.4 billion reduction to the IRS into the debt ceiling and budget cuts package passed by Congress this summer. The White House said the debt deal also has a separate agreement to take $20-billion from the IRS over the next two years and divert that money to other non-defense programs.

With the threat of a government shutdown looming in a dispute over spending levels, there is the potential for additional cuts to the agency.

Fatima Hussein, The Associated Press

Fatima Hussein is a reporter with The Associated Press,  an American not-for-profit news agency headquartered in New York City and founded in 1846.