July 12, 2024

IRS Unleashes New Initiatives: A Deeper Dive into Tax Compliance

Image Credits: Madalina Vasiliu/The Epoch Times

Introduction

The Internal Revenue Service (IRS) has unveiled a series of new initiatives designed to ensure that high-income individuals and large corporations pay their fair share of taxes. Let’s discuss these initiatives and their implications for the wealthy and corporations. Plus, we’ll explore how the IRS makes it easier for taxpayers to engage with the agency and improve compliance.

The Four New Initiatives:

  1. Targeting Foreign Companies Dodging Taxes
  • The IRS is cracking down on American subsidiaries of foreign companies that avoid paying their fair share of taxes.
  • These companies manipulate transfer pricing to reduce their tax burden, and the IRS is sending compliance alerts to around 150 subsidiaries.
 
  1. Expanding the Large Corporate Compliance (LCC)
  • The LCC initiative focuses on the largest and most complex corporate taxpayers with significant assets.
  • It’s expanding to audit an additional 60 of these big corporations, with an average of $24 billion in assets and $526 million in annual taxable income.
 
  1. Challenging Corporate Tax Break Abuses
  • The IRS is reviewing high-risk claims for tax deductions that were repealed in 2017.
  • Hundreds of claims seeking over $6 billion in refunds have been received, and the agency is determined to ensure compliance.
 
  1. Pursuing High-Income, High-Wealth Individuals
  • The IRS prioritizes individuals earning over $1 million annually with more than $250,000 in recognized tax debts.
  • So far, they’ve collected $122 million from this category, and the agency is actively pursuing new cases.
 

Defining “High-Income”

  • The IRS has faced criticism for lacking a clear definition of “high-income” earners, relying on an outdated $200,000 threshold.
  • Inflation has eroded the meaning of high income, making the need for a new threshold apparent.

Improved Taxpayer Services

  • The IRS enhances taxpayer services with community assistance visits, mobile-friendly forms, and the option to respond to online tax notices.
  • They’ve opened Taxpayer Assistance Centers and hired more staff to improve service.
  • Mobile-friendly forms, including identity theft affidavits and tax deferment requests, are now available, with more to come.
  • Businesses can access the new “business tax account” service for more accessible interactions with the IRS.

Compliance and Enforcement Efforts

  • The IRS is intensifying its compliance and enforcement efforts after a widening tax gap of $688 billion in 2021.
  • New employee tax enforcement positions focus on high-income individuals, complex partnerships, and large corporations.
  • Adding fairness to the tax system is critical in combating the tax gap.

Conclusion

The IRS’s new initiatives signal a solid commitment to ensuring that wealthy individuals and corporations pay their fair share of taxes. With an emphasis on compliance, the agency is taking steps to close the tax gap and improve services for all taxpayers. It’s a reminder that no one is above their tax responsibilities, and everyone should play by the same rules.

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