The Internal Revenue Service (IRS) is intensifying its tax enforcement efforts, bolstered by a $60 billion funding boost from the Inflation Reduction Act (IRA). The agency aims to narrow the tax gap—the difference between taxes owed and taxes paid—by targeting specific groups of taxpayers, including high-income earners, non-filers, and those who use corporate jets for personal travel.
According to IRS Commissioner Danny Werfel, the agency is prioritizing enforcement actions on taxpayers with total positive income above $1 million and over $250,000 in recognized tax debt. In fiscal year 2024, dozens of agents have been dedicated to this category, with plans to contact approximately 1,600 taxpayers owing hundreds of millions in taxes.
Werfel emphasized that the IRS’s focus is on “high risk areas amongst the largest corporations, the largest complex partnerships, and millionaires and billionaires.” He and Treasury Secretary Janet Yellen have pledged that audit rates will not rise above historic norms for Americans earning less than $400,000, although a watchdog has questioned this commitment.
In October, the IRS announced four initiatives targeting high-income individuals and large corporations, including U.S. subsidiaries of foreign companies, large corporations with assets over $24 billion, abuse of a repealed corporate tax break, and individual taxpayers with annual incomes over $1 million and recognized tax debts exceeding $250,000.
The IRS is also cracking down on 125,000 cases of non-filers with annual incomes over $400,000 who failed to file tax returns between 2017 and 2021. The agency will send letters (CP59 notices) to these taxpayers, urging immediate action to avoid penalties and stronger enforcement measures.
Another group under scrutiny are individuals who use corporate aircraft for both business and personal travel but fail to categorize expenses properly, potentially owing taxes on personal use of business jets.
The IRS’s enhanced enforcement efforts, driven by advanced technologies like artificial intelligence, helped the agency collect a record $4.9 trillion in taxes last fiscal year. With an additional $46 billion allocated for enforcement from the recent funding boost, the IRS plans to hire another 3,700 tax enforcers to further bolster its compliance activities.
