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IRS Cracks Down on Wealthy Tax Dodgers
New Rules Aim to Recover $160 Billion Annually
The IRS is targeting $50 billion in unpaid taxes caused by wealthy people moving assets between their own companies. New rules from the US Treasury aim to recover $160 billion annually from the top 1 percent of earners, according to the report of Daily Mail.
Biden officials criticized these tax tricks, calling them a “shell game.” An $80 billion boost from the 2022 Inflation Reduction Act has helped the IRS improve oversight.
IRS Commissioner Danny Werfel said these shelters help the wealthy avoid taxes. The loophole involves shifting assets to different companies to lower tax bills, which increased when IRS audit budgets were cut.
Werfel assured that there are no plans to increase audits for middle and low-income households. But filings for large pass-through businesses using this loophole rose from 174,100 in 2010 to 297,400 in 2019, while their audit rates dropped from 3.8 percent to 0.1 percent.
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(photo: Fox Business)
New IRS Rules Target Wealthy Tax Dodgers with $160 Billion Recovery Plan
New rules target companies more than 80 percent controlled by one person or entity filing a consolidated tax return. Tax expert Miles Johnson said these transactions create fake deductions, making income disappear from taxes.
Johnson added that the new rules aim to eliminate the tax benefits of these transactions and better identify them. This change helps focus IRS resources where needed.
The IRS hopes to recover $50 billion over ten years by targeting wealthy tax evaders. President Biden promised not to raise federal taxes on those earning less than $400,000 a year.
Trump’s 2017 tax cuts expire next year, which will raise tax brackets by almost 3 percent without action from Biden. Trump has proposed removing taxes on tips and replacing income tax with tariffs on imported goods.
Recent IRS actions include stopping improper deductions for personal flights on corporate jets and collecting back taxes from wealthy delinquents. Ultra-wealthy taxpayers earning over $10 million a year are the most audited.
Low and moderate-income taxpayers claiming the Earned Income Tax Credit are the second most audited group, being twice as likely to face audits as others, based on 2020 data.
In the next three years, the IRS plans to double audits for those earning over $10 million a year and triple audits for large corporations with assets over $250 million. Audits for large partnerships with assets over $10 million will increase tenfold.
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