Millionaires who have fallen behind on their taxes have already paid half a billion dollars to adjust to the IRS as the agency works to raise the bar for tax compliance.
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The IRS on Friday revealed new figures on the amount of back taxes paid by millionaire households since a 2022 upgrade brought tougher IRS enforcement on corporations, delinquents and wealthy tax evaders.
IRS officials said they withdrew another $360 million from millionaire households who had at least $250,000 in tax debt. This comes after the IRS announced in October that it had recovered $160 million in back taxes from wealthy households.
That’s a total of $520 million — and a strong initial return on investment for a multibillion-dollar funding stream, according to IRS Commissioner Danny Werfel.
“We are seeing significant early indications that our increased scrutiny … is having an immediate impact,” Werfel told reporters on Thursday. He also noted that the IRS is moving forward with new audits on deep-pocketed corporations and partnerships.
However, there is an uncertain future for a portion of the funds associated with this more stringent position.
The Inflation Reduction Act of 2022 allowed the IRS to provide $80 billion over a decade. More than half of the funds were allocated to reviving weak implementation of companies, partnerships and wealthy families.
Werfel and the Biden administration have pledged not to increase audit rates for families with incomes of less than $400,000 a year.
But in a deal to raise the debt ceiling, the White House agreed with House Republican negotiators to redirect $20 billion elsewhere. Part of a potential new deal to avoid a partial government shutdown on January 19 would speed up the $20 billion withdrawal process.
Werfel said the quick recovery of the $20 billion would not affect high-profile IRS and campaign promotions until the final years of the decade.
But he said the money is being well spent on implementation and improving customer service. “For this progress to continue, we must maintain reliable and consistent annual appropriation of our agency, as well as keep FRA funding intact,” Werfel said Thursday.
There are questions about long-term financing, but there are also questions that need answers much sooner.
The income tax filing season begins on January 29, and IRS funding could reach a dead end on February 2 without a new spending agreement. Although people will still be able to file 2023 income tax returns in the event of a lapse, Werfel noted that a government shutdown has never occurred during tax filing season.
“Lockdowns are very annoying,” he said, later adding that facing one now would “increase the risk that we will not have as smooth a filing season as we intend it to be.”