Posted by Khalil Crumes.
The nation’s tax revenue suffers a significant blow due to millionaire and billionaire tax evasion, totaling over $150 billion annually, as per IRS Chief Danny Werfel. This evasion aggravates government shortages and challenges the fairness of the tax system. The IRS, encouraged by recent Congressional funding, has initiated an extensive crackdown on wealthy individuals, partnerships, and large companies to address this issue. Werfel points out the necessity of ensuring every taxpayer contributes their fair share, emphasizing the substantial gap between owed and paid taxes among the affluent, where said, “When I look at what we call our tax gap… millionaires and billionaires… are $150 billion of our tax gap.”
The IRS’s enforcement efforts were disadvantaged in previous years due to inadequate funding, resulting in diminished staff, technology, and resources, particularly for audits of complex tax returns. Audits of high-income taxpayers plummeted by over 80% in the last decade, despite a 50% surge in the number of million-dollar earners. Werfel highlights the urgent need for investments to restore the IRS’s capacity to fairly assess taxes owed by all taxpayers, regardless of complexity, “For complex filings, it became increasingly difficult for us to determine what the balance deal was.”
Despite the IRS’s successes in recovering unpaid taxes from millionaires, some Republicans criticize the agency’s expanded enforcement, fearing undue burden on small businesses and disputing its revenue-raising potential. However, the Treasury Department anticipates a substantial increase in tax revenue through enhanced IRS enforcement, projecting an additional $561 billion between 2024 and 2034. The IRS continues to innovate its enforcement strategies, employing AI to identify high-risk returns efficiently while minimizing audits for compliant taxpayers. In explaining why, they state, “What AI does is it allows us to put on night vision goggles. What those night vision goggles allow us to do is be more precise in figuring out where a high-risk [return] is and what a low risk is, and that benefits everyone.”
Khalil is majoring in accounting and criminal justice at Seton Hall University, Class of 2027.
https://www.cnbc.com/2024/02/22/tax-evasion-by-wealthiest-americans-tops-150-billion-a-year-irs.html