The Internal Revenue Service (IRS) has successfully retrieved $1.3 billion in unpaid taxes from high-wealth individuals since the autumn of last year, the agency revealed on Friday. This achievement is attributed to increased spending on collection enforcement following the enactment of President Joe Biden's groundbreaking climate, healthcare, and tax legislation in 2022.
Yellen Emphasizes the Impact of Wealthy Tax Avoidance
Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel made a joint announcement during their visit to an IRS facility in Austin, Texas, marking the significant milestone in tax collections. Yellen, during her address in Austin, highlighted that in 2019, the wealthiest one percent of Americans were responsible for over twenty percent of all overdue taxes, placing a heavy burden on ordinary citizens. She emphasized the redirection of IRS resources towards substantial endeavors to combat tax evasion.
Targeting High-Wealth Individuals for Delinquent Tax Payments
In an effort to recover unpaid taxes, the IRS initiated various campaigns in 2023 and 2024 aimed at pursuing affluent individuals with outstanding tax liabilities. The focus was on taxpayers with an annual income exceeding $1 million and a recognized tax debt of more than $250,000. Since the inception of these initiatives, nearly 80% of the 1,600 millionaires targeted by the IRS for delinquent tax payments have now settled their debts, resulting in the recovery of over $1.1 billion. Additionally, in the initial six months of a new initiative introduced in February 2024, the IRS managed to collect $172 million from 21,000 wealthy taxpayers who had not filed tax returns since 2017.
Calls for IRS Budget Cuts amid Collection Success
Despite the IRS's remarkable success in tax collection, there have been calls from some Republican quarters to decrease funding for the agency. Former President Donald Trump's campaign promised significant cuts to federal agency spending, including a reduction in IRS expenditures. The claims regarding the hiring of 87,000 new IRS agents to target income sources have been debunked as misinformation. The Treasury Department's plan to recruit additional IRS employees over the next decade to replace retiring staff does not align with the exaggerated figures presented.
IRS Modernization Efforts and Direct File Program
As part of its ongoing modernization initiatives, the IRS unveiled the Direct File program this year, allowing individuals with straightforward W-2 forms to compute and submit their tax returns directly to the IRS. In April, the IRS reported that participants in the program claimed over $90 million in refunds. Originally involving 12 states during the 2024 tax filing season, the program has expanded to include more states for the upcoming 2025 tax season, such as Maryland, Oregon, New Jersey, Pennsylvania, New Mexico, Connecticut, North Carolina, Wisconsin, and Maine.