IRS crackdown on wealthy Americans has brought in $160M in back taxes

The IRS has collected $160 million in back taxes this year as part of its sweeping effort to crack down on wealthy Americans who aren’t paying what they owe. 

In September, the agency began targeting about 1,600 millionaires who owed at least $250,000 each in overdue taxes. Since then, the IRS has closed 100 of those cases, netting about $122 million in back taxes, it said Friday.

The IRS brought in about $38 million from other top-income earners earlier this year, bringing the cumulative total to $160 million. 

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Funding for the latest enforcement efforts was included in the Democrats’ health care and climate change spending bill — dubbed the Inflation Reduction Act — that President Biden signed into law in 2022. The influx of money is aimed at improving tax compliance among big corporations and wealthy Americans and shrinking the estimated $600 billion tax gap. 

“Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to hide their income and evade paying their share,” the agency said. “The IRS is now taking swift and aggressive action to close this gap.”

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Still, the additional funding has elicited fierce pushback from Republicans and other critics, who say that a beefed-up IRS could ultimately hurt lower-income Americans. 

That’s because the IRS disproportionately targets low-income Americans when it conducts tax audits each year. The discrepancy is primarily due to high-income taxpayers having complex investments that can easily shroud the gaps between taxes owed and paid vs. taxes reported and paid.

The IRS has repeatedly stated that it will comply with Treasury Secretary Janet Yellen’s order to not increase audit rates for Americans who earn less than $400,000 a year — a message the agency reiterated last week when it announced efforts to crack down on 1,600 millionaires and 75 large businesses that it said owed millions in back taxes.

“As part of the effort, the IRS will also ensure audit rates do not increase for those earning less than $400,000 a year as well as adding new fairness safeguards for those claiming the Earned Income Tax Credit,” it said at the time.