The Internal Revenue Service (IRS) has argued that decades of underfunding have left it at a disadvantage when going up against the country’s highest earning taxpayers. The IRS argues that wealthy taxpayers show up to meetings with multiple tax attorneys, each specialized in niche areas of tax law. IRS agents rarely have the same schooling and experience as these legal professionals, and the agents have not done as well gathering evidence and building successful cases against the wealthy as they would have liked.
But this could all change.
In 2022, the Inflation Reduction Act provided the IRS with $80 billion in funding. The main goal of this funding: take down the wealthy using unethical and illegal tactics to avoid their tax obligations. We are two years into the effort and are starting to gather some data on the agency’s progress. Thus far, the agency has reported the following progress.
#1: Opened more cases against the wealthy
The agency has stated that it has opened more than 1,500 cases involving millionaires and billionaires in 2023 alone and was able to recoup “several hundred million dollars” in taxes owed within this population.
#2: Added agents to its force
The IRS also announced the addition of 3,700 new agents to focus on review of the tax obligations for the wealthy, large corporations, and private investment funds. These are often complicated cases as they can include the use of pass-through entities like limited liability companies and trusts to shift funds around for various reasons. Agents will dig into the details to see if these transfers are an attempt to thwart tax obligations.
#3: Big plans for AI
The agency has also announced that it plans to use artificial intelligence programs to help dig out information on the use of partnership structures to avoid paying taxes. If successful, the program would provide information to an agent to begin to build their case against the taxpayer.
Ultimately, the agency expects it will take years to gather data to provide a true representation of the results of this increased funding and shift to a targeting the wealthy. What we do know is that the IRS continues its focus on this segment of the population. Wealthy taxpayers who find themselves in the IRS’ crosshairs are wise to take the matter seriously. The attorneys at Goldburd McCone are experienced with these types of high stakes cases and can provide guidance to better ensure your interests are protected throughout the process.