More Than $1 Billion in Past-Due Taxes Collected From Millionaires: IRS

The agency credited the tax collection on funds received after the Inflation Reduction Act was enacted.

Internal Revenue Service Commissioner Daniel Werfel testifies before the House Ways and Means Committee on Capitol Hill in Washington, on Feb. 15, 2024. Chip Somodevilla/Getty Images

The Treasury Department and the Internal Revenue Service (IRS) announced Thursday that a tax-collection initiative has succeeded in netting more than $1 billion in back taxes from wealthy taxpayers.

“The IRS in 2023 launched a new initiative to pursue high-income, high-wealth individuals who have failed to pay recognized tax debt,” the Treasury said in a July 11 press release. Last year, the IRS revealed it had collected $38 million from more than 175 of these targets. The agency then expanded the effort to 1,600 individuals leading to the billion-dollar collection.

The campaign focused on taxpayers who have more than $1 million in income and more than $250,000 in tax debts.

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The Treasury said the new initiative was made possible by the Inflation Reduction Act (IRA), which gave the IRS billions of dollars in funding. While the IRS was initially granted $79.4 billion in IRA funding, $21.6 billion was eventually rescinded.

The Treasury said that prior to receiving IRA funds, the IRS was not in a position to ensure that wealthy taxpayers, large corporations, and complex partnerships paid their actual taxes.

IRS Commissioner Danny Werfel pointed out that “years of funding declines meant the IRS couldn’t get to money that we knew was owed, but we simply didn’t have the resources or staffing to collect.”

In February, the IRS said that if IRA funding were to be sustained over a 10-year period through 2034, the agency would generate as much as $851 billion in additional revenues.

U.S. Secretary of the Treasury Janet L. Yellen said that “President Biden’s Inflation Reduction Act is increasing tax fairness and ensuring that all wealthy taxpayers pay the taxes they owe, just like working families do.”

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Meanwhile, Republicans in Congress have criticized how the agency makes use of IRA funding. Their main concern lies in how much of the funding the agency deploys for enforcement activities, such as hiring new employees for cracking down on individual taxpayers.

The IRS had revealed plans to boost enforcement staff by 40 percent for fiscal year 2024. The largest workforce increase would be among revenue agents tasked with conducting “face-to-face audits of more complex returns,” claimed the agency.

However, the IRS threatened that any loss of funding could result in a decreased focus on wealthy taxpayers.

Funding Purposes and Audit Rates

During an April 19 Senate Finance Committee hearing last year, Sen. John Thune (R-S.D.) raised concerns about the IRS using IRA funds for enforcement.

“Of the $80 billion provided to the IRS in the partisan IRA, more than half, or about $46 billion, is directed toward enforcement activities, while only 4 percent of the $80 billion … was earmarked for improving taxpayer services,” he noted.

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In May, the IRS said it would use IRA funds to boost enforcement personnel such as accountants, engineers, economists, data scientists, attorneys, and tax experts with specialized skills, stressing that the increase in employee count allowed the agency to “double audit rates on the wealthiest taxpayers.” Furthermore, the IRS seeks more funding over the coming years to grow its employee count.

A shortage of funds, on the other hand, will lead to an increase in scrutiny of low-income filers, the IRS warned.

“Since lower-income taxpayers are more likely to have simple tax returns, this lack of funding will likely translate into a higher share of audits falling on low- and middle-income taxpayers, while examination coverage rates for high-income and large corporate taxpayers will severely decline,” the tax agency said.

Crackdown on Wealthy Taxpayers

In its latest press release, the Treasury noted that the IRS has launched several initiatives over the past two years targeting wealthy taxpayers.

Specifically, the tax agency is cracking down on the abuse of corporate jets for personal use, pushing for collecting taxes owed by 125,000 high-income earners who have not filed taxes for many years, and is closing a tax loophole used by complex partnerships that could give the IRS more than $50 billion in additional revenues over the coming decade.

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“In addition to enhancing tax fairness, these initiatives will narrow the gap between taxes owed and taxes paid, reducing the deficit,” the Treasury said.

Meanwhile, a Republican-led House appropriations subcommittee approved the fiscal year 2025 Financial Services and General Government Appropriations Act in June that cut down IRS funding.

The act sets aside $10.12 billion for the IRS in fiscal 2025, which is $2.2 billion less than what was allocated in fiscal 2024. It reduced the tax agency’s enforcement funding by $2 billion.

Rep. Dave Joyce (R-Ohio), chairman of the subcommittee, said that the bill “takes steps to prevent agencies like the IRS from unfairly targeting hardworking Americans.”

The funding cuts were criticized by Rep. Steny H. Hoyer (D-Md.): “This bill lets tax cheats off the hook by cutting IRS funding—all at the expense of hardworking Americans who dutifully pay their taxes,” he said. “These cuts cost far more than they save.”