On 8/23/24, the IRS Report Card was released via Notice IR-2024-223 regarding the progress and improvements made possible by the Inflation Reduction Act (“IRA”). The IRS Report Card states that the IRA has made it possible for the “IRS to uncover and address tax evasion shrouded in complexity that requires subject matter expertise and data science.” The IRS attributes its progress and successes to newly implemented innovative technology, data, and analytics to operate more effectively. The IRS Report Card provides taxpayers with information on the efforts that the IRS plans to intensify and accelerate in upcoming months and into the future based on the following highlights:
- Disrupt tax scams and provide immediate and comprehensive victim support when scams occur.
- Complete and sustain new solutions for protecting taxpayer data from unauthorized access and disclosure.
- Put in place increasingly accurate audit selection methods that hold accountable those taxpayers who use complex financial maneuvers to shield income while avoiding burdening those taxpayers who play by the rules.
The IRA has allowed the IRS to focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap. The IRS Report Card showcases:
- “high-end collection cases are concentrated among taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt. Out of a total of 1,600 of these cases, the IRS has assigned 1,500 to revenue officers, with over $1 billion collected so far”.
- “new effort focused on high-income individuals who have failed to file federal income tax returns in more than 125,000 instances since 2017. Non-filers receive IRS compliance letters alerting them that the IRS is aware of their missing return and encouraging them to file or contact the IRS. The new initiative involves more than 25,000 people with more than $1 million in income, and over 100,000 people with incomes between $400,000 and $1 million between tax years 2017 and 2021”.
The IRS Report Card features renewed compliance focus that includes the following extracts:
- Abusive use of partnerships. Last month, the IRS announced a new series of steps to combat abusive partnership transactions that allow aggressive taxpayers to avoid paying what they owe.
- Activities involving large corporations and partnerships. These efforts include opening examinations of 76 of the largest partnerships in the U.S., representing a cross section of industries including hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms and other industries. Other activities include expanding the large corporate compliance (LCC) program.
- Aircraft use. In February, the IRS announced plans to begin dozens of audits involving personal use of business aircraft. The audits are focused on aircraft usage by large corporations, large partnerships, and high-income taxpayers. The IRS is examining whether the use of jets is being properly allocated between business and personal use.
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