Saturday, January 13, 2024

IRS says it collected $360 million more from rich tax cheats as its funding is threatened yet again


But the funding that made it possible for the IRS to target wealthy tax dodgers is in jeopardy

Millionaires who were overdue on their taxes have coughed up more than half a billion dollars since the Internal Revenue Service stepped up its enforcement of the tax code against the ultrawealthy, the IRS revealed on Friday

Using new funding earmarked for the IRS to target wealthy and corporate tax cheats, the IRS since mid-2022 has collected more than $520 million from about 1,600 households with income of more than $1 million and that are known to have unpaid tax bills of more than $250,000.

By late October, the IRS crackdown had hauled in $160 million. The agency has recouped an additional $360 million from the delinquent millionaires in the months since.

“The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organizations faced in [previous] years,” IRS Commissioner Danny Werfel said in a statement. “The additional resources the IRS has received is making a difference.”

But the funding that has made it possible for the IRS to target wealthy tax dodgers is in jeopardy.

IRS says it collected $360 million more from rich tax cheats as its funding is threatened yet again

Identity theft victims waited 19 months for tax refunds Despite some lingering issues, the national taxpayer advocate sees room for ‘cautious optimism’ as the 2024 tax season gets underway

The IRS, underfunded for years, has been stuck in an endless loop of whack-a-mole.

In this arcade game, players must strike down plastic moles that randomly pop up from their hiding places. The faster you are with your mallet, the higher your score. But victory can be extremely hard won.

For the IRS, 2023 proved to be that kind of year: Some great hits like technology upgrades, but also some troubling misses like entrenched backlogs, according to the annual report released this week by National Taxpayer Advocate Erin Collins.

“The year 2023 was one of extraordinary transition for the IRS and therefore for taxpayers,” she wrote. “Despair has turned to cautious optimism.”

This annual dive into the inner workings of the IRS comes just as it announced the 2024 tax season will start on Jan. 29. The agency expects more than 128.7 million individual tax returns to be filed by the April 15 deadline.

The Inflation Reduction Act pumped much-needed funds — $80 billion — into the IRS to hire staff and modernize.

More money is helping the IRS. Republicans still want to cut its budget.

Collins identified processing delays for identity theft victims as one of the agency’s biggest challenges. On average, the IRS took 19 months to resolve self-reported identity theft cases and issue refunds — a response time Collins calls “unconscionable.”

“Many taxpayers depend on their tax refunds to meet their living expenses, particularly low-income taxpayers,” she wrote in her report.

When a taxpayer notifies the IRS that he or she has been a victim of identity theft, the case is handled in its Identity Theft Victims Assistance unit. But many filers don’t realize they’ve been victimized until they try to electronically file their tax return. The IRS closed the year with about 484,000 of these identity theft cases.

In addition to actual identity theft victims, each year the IRS flags millions of returns it suspects are fraudulent. The problem is many of those returns may be legit, but the filers receive only one letter asking them to authenticate their identity, Collins said.

If people move or the notice is never opened or gets lost, their returns and refunds aren’t processed. In 2022, the IRS suspended the processing of 4.8 million tax returns and requested taxpayers authenticate their identities before releasing their refunds. More than 2.5 million returns remained suspended as of December 2022, because the taxpayers still had not authenticated their identities.

Part of the reason for the backlog was the prioritizing of telephone service over paper processing. IRS employees in the accounts management function have two roles, Collins pointed out. They have to answer phones and process paperwork, such as amended tax returns, taxpayer correspondence and some identity theft cases.

If the workers prioritize telephones, paper processing suffers. If they prioritize the latter, helping taxpayers on the phone is affected.