US IRS Enforcement Efforts Recover $1.3 Billion in Unpaid Taxes, Treasury Reports

WASHINGTON (Reuters) – The U.S. Treasury and Internal Revenue Service announced on Friday that they have successfully recovered $1.3 billion in unpaid taxes from high-income individuals through new enforcement initiatives, which are funded by $60 billion allocated to IRS modernization in the Inflation Reduction Act aimed at addressing climate change.

Importance of the Initiative

Congressional Republicans have pledged to eliminate the 10-year IRS funding established in 2022, claiming it would lead to excessive scrutiny of taxpayers. On Thursday, former President Donald Trump reiterated his commitment to rescind all unspent funds related to the Inflation Reduction Act, which includes substantial financial resources designated for the IRS.

The IRS plans to utilize approximately $10.6 billion of these funds by the conclusion of the 2024 fiscal year, which ends on September 30. This leaves nearly $50 billion potentially available. However, budget analysts warn that reversing these plans could increase the federal budget deficit by over $100 billion within a decade, as the agency would miss out on enhanced enforcement capabilities.

Financial Highlights

According to the Treasury, in the first six months of an initiative aimed at 125,000 wealthy individuals who have not submitted tax returns since 2017, the treasury has recouped $172 million from 21,000 non-compliant taxpayers. Additionally, another effort targeting individuals with incomes exceeding $1 million and $250,000 in recognized unpaid tax debts has generated $1.1 billion for the Treasury.

Key Insights

U.S. Treasury Secretary Janet Yellen stated that the audit rate for millionaires dropped by 80% due to previous budget cuts at the IRS. She remarked that during the prior administration, as the audit rates on high-income taxpayers declined, the number of audits on individuals earning below $200,000 increased. In 2019, it was estimated that the top 1% of Americans owed over 20% of unpaid taxes, placing a disproportionate burden on ordinary taxpayers.