IRS Commissioner Danny Werfel announced on Friday that the IRS is intensifying its efforts to pursue 1,600 millionaires who individually owe a minimum of $250,000, collectively amassing hundreds of millions of dollars in outstanding debts. This marks an expansion of their mission to ensure that affluent taxpayers fulfill their financial obligations.
In addition to this focus, the IRS is also directing its attention toward large partnerships, construction companies engaging in questionable financial practices with shell companies, a trend previously identified in Texas and Florida, and affluent individuals who are evading taxes associated with funds held in foreign bank accounts.
IRS Enhances Tax Evasion Detection: AI Technology, Large Partnership Audits, and Foreign Account Scrutiny
The IRS is leveraging artificial intelligence technology to detect patterns and trends indicative of tax evasion. Werfel disclosed that the IRS intends to audit 75 of the largest partnerships in the United States, encompassing law firms, hedge funds, and other entities, each of which typically possesses assets exceeding $10 billion. No precise estimates were provided regarding potential collections or the extent of income being shielded from taxation within this group.
Starting in October, the IRS plans to issue specialized compliance alerts to approximately 500 additional large partnerships that exhibit discrepancies on their balance sheets, thanks in part to increased funding from the Inflation Reduction Act, which Congress allocated to the IRS. This enhanced funding enables a more comprehensive enforcement effort.
The IRS also announced its intention to target high-income taxpayers who employ foreign bank accounts to evade disclosure and associated taxes, with plans to conduct audits of the most egregious cases in fiscal year 2024.
An IRS multiyear assessment has identified a significant number of individuals whose average foreign account balances exceed $1.4 million, suggesting potential non-compliance with tax regulations. These individuals are required to submit necessary documentation when the combined value of all their foreign financial accounts surpasses $10,000 at any point.
Werfel highlighted that the IRS will also focus on individuals involved in schemes that exploit the tax system for fraudulent purposes, such as promising exaggerated refunds based on the Earned Income Tax Credit or engaging in tax-related identity theft.
The IRS has acknowledged ongoing efforts to enhance audits related to Earned Income Tax Credits and plans to introduce modifications for the upcoming filing season. Further details regarding these changes will be provided in the autumn.