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Regulation and Compliance > Federal Regulation > IRS

Millionaires Owe IRS More Than $2B in Unpaid Taxes

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What You Need to Know

  • “Wealthy tax cheats are stealing billions from the American people,” Sen. Ron Wyden says.
  • The IRS, which is short on resources, fails to collect much of this debt.
  • Tax collectors could make significant progress by focusing on high earners owing the most.

Millionaires owe the Internal Revenue Service more than $2.4 billion in unpaid taxes, according to a just-released study by the Treasury Inspector General for Tax Administration.

The Treasury Department’s watchdog said Monday that it has previously reported that the IRS “does not consider the taxpayer’s income or wealth when prioritizing Taxpayer Delinquent Accounts, focusing instead on the dollar amount” of the balance due.

“This creates a higher risk that taxpayers with high incomes are not paying their tax debts even though they have the ability to pay,” the IG stated in its report, High-Income Taxpayers Who Owe Delinquent Taxes Could Be More Effectively Prioritized.

The watchdog reported that “with the IRS Collection function’s limited staffing of experienced revenue officers, it is important to determine if the IRS is effectively addressing nonpayment by high-income taxpayers.”

The IG identified 685,555 taxpayers who had a balance due as of May 14, 2019, who reported adjusted gross income (AGI) of $200,000 or more and owed a combined total of $38.5 billion.

“Because the IRS prioritizes high balance due … cases for collection, many of these high-income taxpayers would be included in high-priority work. However, balances due are not prioritized by incomes earned and some improvements could be made to prioritize high-income taxpayers more effectively,” the report stated.

A separate IRS analysis of 64,317 delinquent tax cases showed that the IRS collected less than half of tax debt owed by these high-income taxpayers within 52 weeks of assignment to Field Collection, the watchdog report said.

“Taxpayers having an average AGI of over $1.5 million paid the IRS an average of 39% of what they owe,” the report stated. “While 39% is more than what the IRS predicted it would collect, these high-income taxpayers still owed over $2 billion.”

Senate Finance Committee Chairman Ron Wyden, D-Ore., said Monday in a statement that the Treasury IG report ”reiterates wealthy tax cheats are stealing billions from the American people.”

Importantly, Wyden continued, “the report notes the IRS could make significant progress in cracking down on tax cheats by focusing on those who make the most money and owe the most in unpaid tax bills.”

The report also noted that “intentional nonpayment by those with significant financial resources and sophistication is a particularly flagrant form of noncompliance. This group is relatively small and far greater resources should be directed their way,” adding that increasing the number of enforcement staff in areas with the greatest number of enforcement cases is also important.

The IRS “must do better” despite inadequate resources, Wyden added. “This is an issue I will be raising with the commissioner at next month’s annual filing season hearing.”

House Ways and Means Oversight Subcommittee Chairman Bill Pascrell said Tuesday that he will hold a hearing Thursday with IRS Commissioner Chuck Rettig on the 2021 filing season.


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