The Internal Revenue Service estimates that the nation’s wealthiest individuals evade taxes to the tune of $150 billion annually. To recover owed funds, the IRS is rolling out enhanced enforcement measures to generate an additional $561 billion in tax revenue over a decade. Some critics are concerned about the policing and increased surveillance being undertaken by the Treasury Department in pursuit of these funds.
IRS Leverages Technology, Including AI, To Detect and Target Offenders
The IRS is using new technologies, including artificial intelligence, to improve the agency’s ability to detect and address tax evasion, aiming for a more fair and efficient tax system for all Americans. Some critics see such surveillance as intrusive and inappropriate.
Critics See Irony in Using Taxpayer Funds to Police Their Tax Returns
Critics are concerned about the burden of targeting businesses and individuals with audits unfairly and the irony of using $80 billion in taxpayer funds to police the same taxpayers more aggressively than in the past.
IRS Commissioner Detail Plans and Thought Behind Bolstered Enforcement
In a recent televised interview with CNBC, IRS Commissioner Danny Werfel explained the IRS’s plan to ensure all filers are treated fairly under the tax code and that individuals and businesses are held accountable for paying their full tax burden.
Tax Evasion and Avoidance Amounts to $150 Billion Annually
According to the IRS, tax avoidance by the nation’s wealthiest individuals amounts to over $150 billion annually. Werfel laid out the technologies and means employed by the IRS with its $80 billion infusion in their arsenal to find and bring tax evaders to account.
Inflation Reduction Act Gave IRS $80 To Enforce Tax Collection
The passage of the Inflation Reduction Act of 2022 (IRA) gave the IRS substantial new funding from Congress to ensure all taxes due are collected. With the $80 billion outlay from the IRA, the IRS has initiated an extensive effort to target affluent individuals, such as those with private jets, partnerships, and major corporations, for tax compliance.
IRS Announces Plan to Audit Jet Owners with Suspicious Travel Patterns
This week, the IRS announced they would be auditing private jet owners for non-business uses of private jets. The IRS uses technology and analytics databases to find patterns it would tend to expect from individuals and businesses attempting to evade paying taxes.
IRS Micro-Target Offenders Using Technology Tools
Using AI tools, the IRS will audit companies and partnerships that own jets suspected of being misused for personal purposes and, through that process, potentially find reasons to audit associated wealthy individuals.
Exposing Tax Avoidance Through Limited Partnerships
According to Werfel, the IRS also identified limited partnerships as another means used for tax evasion purposes. He states that some high-net-worth individuals use a business entity as a place to shield their income and thus illegally avoid paying taxes.
76 Investigations Underway on Hedge Funds, Real Estate Investors, and Law Firms
In response to this revelation, the IRS launched the Large Partnership Compliance program to audit some large and complex partnership tax returns. Seventy-six investigations are already underway, including hedge funds, law firms, and real estate partnerships.
Policing of Tax Returns Irritates Republicans Who Took $20 Billion Back from IRS
Such efforts to investigate and sift through data to proactively search for fraud have irked Republicans, who fought and won a deal last year to reclaim $20 billion of the $80 billion granted in the IRA to increase IRS policing of tax returns.
Conservatives Eschew Policing By IRS
Republicans have indicated they would prefer the IRS to follow a precedent similar to that expected of U.S. law enforcement– police do not dig around to discover a crime, they only respond when alerted to the effects of a crime, and they can only enter a building after receiving a search warrant.
Small Businesses Targeted by IRS Expansion Weighed Down by Bureaucracy
Critics of the IRS program to hunt down evaders also point to the negative outcome of small business owners being unduly burdened by the extra surveillance measures and waves of audits without tax and legal teams to assist them through the bureaucratic process.
IRS Aspires to Minimize Efforts on Compliant Taxpayers
The IRS claims that by leveraging AI to enhance the precision of its audit selection process, innocent business owners and individuals will not be implicated unfairly. The approach is intended to minimize unnecessary audits on compliant taxpayers while focusing on high-risk profiles for evasion.
