IRS to focus on tax-dodging millionaires instead of ‘working-class taxpayers’
The IRS announced that its enforcement system will change its focus from going after average and low-income taxpayers to millionaires and corporations who owe hundreds of thousands of dollars in tax debt.
The change follows a recent "top-to-bottom review of enforcement efforts," the IRS said Friday. In addition to focusing on "high-income" cases of people earning more than $1 million a year with over $250,000 in tax debt, the agency said it was increasing safeguards for people receiving the Earned Income Tax Credit, one of the government's largest antipoverty programs.
"This new compliance push makes good on the promise of the Inflation Reduction Act to ensure the IRS holds our wealthiest filers accountable to pay the full amount of what they owe," said IRS Commissioner Danny Werfel. "The years of underfunding that predated the Inflation Reduction Act led to the lowest audit rate of wealthy filers in our history."
The Biden administration's Inflation Reduction Act, passed in August 2022, gave the agency $80 billion. Prior to the Inflation Reduction Act, funding for the IRS had been cut repeatedly since 2010, according to the Center on Budget and Policy Priorities.
During former President Donald Trump's term, additional cuts were made, even over the objections of Trump's Treasury Secretary Steven Mnuchin. During Trump's administration, the number of IRS agents had been cut by a third from 2010 levels, according to a 2018 ProPublica investigation, with the number of auditors reaching levels not seen since the early 1950s.
Under the Trump administration, 36% of audits were towards people receiving the Earned Income Tax Credit, according to ProPublica. Most of of those receiving the credit earned under $20,000. Between 2011 and 2018, the number of audits for those earning over $500,000 a year dropped from 8% to 2.5% while audits of those earning under $25,000 only dropped from 1.2% to 0.7%.
“Republican budget cuts going back a decade have gutted the ability of the IRS to crack down on tax cheating by high earners," Senator Ron Wyden (D-Oregon) told the Associated Press in 2020. "The next Congress needs to get serious about making sure that corporations and the wealthy are paying a fair share, and rebuilding IRS enforcement is a big part of that job.”
The $80 billion from the Inflation Reduction Act is more than six times the IRS' 2017 annual budget of $12 billion.