IRS Update: Intensified Focus To High Earners Who Seem To Have Forgotten Their Tax Obligations

The forgotten obligations of high earners have resulted in a huge tax gap which the IRS hopes to solve.

In line with the gap made by high earners who have forgotten their tax obligations, the IRS will now be resorting to the help of AI. (Photo: Foodman CPAs and Advisors)

Tax Obligations Of High Earners

The IRS is intensifying its focus on high earners and big businesses who have not fulfilled their tax obligations. While the audit rate for those high earners earning over $1 million has dropped in recent years, the agency is determined to address this disparity by recovering unpaid taxes of said high earners.

According to a published article by CNBC, they will be paying close attention to high earners and areas such as partnerships, residency in Puerto Rico, international tax evasion, cryptocurrency, and estate and gift tax filings.

To enhance their auditing efforts, the IRS will be leveraging data analytics and artificial intelligence to pinpoint high earners who seem to forget their obligations with the tax.

IRS Tax Gap

In a published article by Just Taxes Blog, the IRS tax gap, the difference between taxes owed and paid, grew to $688 billion in 2021. Closing this gap could significantly reduce the government’s deficit. Increased IRS funding under the Inflation Reduction Act is crucial to enforcing tax laws and cracking down on tax cheats, especially high earners and large corporations.

The gap may be larger due to tax avoidance tactics. Boosting IRS funding has already improved taxpayer service and compliance rates. Deep budget cuts to the IRS in the past decade have contributed to the gap’s growth, highlighting the importance of funding and enforcement efforts.

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