IRS Reclaims $1.3 Billion in Back Taxes from Wealthy Americans – Is This Just the Beginning?

The IRS and U.S. Department of the Treasury recently announced that $1.3 billion has been collected from high-income, high-wealth individuals as part of a larger effort to ensure tax compliance from those who have historically evaded payments. With the backing of the Inflation Reduction Act, these initiatives are likely just the beginning of a broader crackdown.

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The IRS has found success in collecting from high-income earners largely due to the Inflation Reduction Act. Before it, the IRS had no resources to effectively pursue wealthy tax evaders. With this additional funding, they can now pursue delinquent taxpayers more aggressively. 

In February 2024, a new initiative was launched to accelerate these efforts. The program targets 125,000 high-income earners making between $400,000 and over $1 million annually, who haven't filed tax returns since 2017. In the first six months of this program, the IRS collected $172 million from just 21,000 individuals. Expanding on that momentum, the IRS also recovered $1.1 billion from 1,600 high-income individuals who owed more than $250,000 each in back taxes. 

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Collecting this much quickly is likely just the start of a larger push to ensure Americans fulfill their tax obligations. Janet Yellen, U.S. Secretary of the Treasury and IRS Commissioner Danny Werfel emphasize continuing this momentum to ensure that the wealthiest Americans pay their taxes. 

While the latest initiatives are moving the needle, the $1.3 billion collected is only a fraction of what is still owed. We'll likely continue to see increased efforts on this front in future years. 

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What does this mean for other taxpayers? 

According to Statista, about 40.1% of American households didn't pay income tax in 2022. However, the vast majority of these households were making between $40,000 and $50,000 annually, and the IRS has expressed that its primary focus is on high earners and that it isn't looking to burden regular taxpayers. 

These same statistics revealed that of those making $500,000 to $1 million, about 0.4% of that group didn't pay income taxes. Those are the real targets of the IRS's initiatives to collect back taxes. That doesn't mean that the IRS won't ever come looking if you aren't paying your taxes, but as part of this current initiative, they target higher incomes. 

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Alongside its efforts to recover back taxes from wealthy individuals, the IRS is also working to improve its taxpayer service through the Digital First Initiative. Using resources from the Inflation Reduction Act, the IRS has created online tools to help taxpayers save time and money as they file. 

With the IRS upgrading its technology and expanding its resources, it may become harder to slip through the cracks. If you have concerns about your taxes or are unsure if you've filed correctly, it's wise to consult a financial advisor to ensure everything is in order.

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