The IRS Is Getting $80 Billion. For What? : 1A (2024)

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The IRS Is Getting $80 Billion. For What? : 1A? ›

The IRS says the money will help close the yearly deficit of $600 billion between the taxes the IRS collects and the taxes owed. The agency plans to spend the money on hiring new enforcement agents, modernizing technology, auditing the wealthiest Americans, and improving the taxpayer experience.

Even after accounting for IRS's enforcement efforts, the net tax gap was $625 billion in 2021. The Inflation Reduction Act provided $80 billion in additional funding to the IRS, much of which is dedicated to closing the tax gap by specifically enforcing tax compliance by the wealthiest tax evaders.

The IRS got $80B to help people and chase rich tax avoiders. Here's how it's going. Commissioner Danny Werfel says the IRS has created a "high-risk list" of 1,600 millionaires and billionaires who owe back taxes.

For 2021, the IRS projects a gross tax gap of $688 billion and a net amount of $625 billion. Individual income taxes made up the largest share of unpaid taxes, followed by employment and corporate income taxes.

Historically, the IRS's funding has primarily been discretionary—that is, the agency has mostly been funded through annual appropriation acts. Through 2031, however, the agency's activities are also supported by nearly $80 billion in mandatory funding provided in the 2022 reconciliation act (Public Law 117-169).

A 24% federal tax withholding is taken right away, dropping the lump sum estimate to about $363.4 million. Because the federal government counts lottery winnings as income, the winner could be moved into a tax bracket facing a tax rate as high as 37%, which could drop the lump sum to around $301.3 million.

The most significant consequence would be a massive inflation. The government requires money to carry on its business and if it wasn't collecting dollars via taxes, it would have to create them by borrowing or by printing them.

The agency identified 1,600 millionaire taxpayers who have failed to pay at least $250,000 each in assessed taxes. So far, the IRS has collected more than $480 million from the group “and we are still going,” Werfel said.

The highest-earning Americans pay the most in combined federal, state and local taxes, the Tax Foundation noted. As a group, the top quintile — those earning $130,001 or more annually — paid $3.23 trillion in taxes, compared with $142 billion for the bottom quintile, or those earning less than $25,000.

How many people owe the IRS money? ›

Most people file and pay their taxes by April 15. But more Americans than ever owe past-due taxes. As of the end of 2022, 18.6 million individual taxpayers owed the Internal Revenue Service $316 billion in overdue taxes, according to the agency. That number is up from 16.8 million owing $308 billion in September 2019.

Underreporting accounted for $542 billion of 2021's tax gap, the IRS said. Underpayment indicates taxes were reported, but filers failed to pay what they owe on time.

For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.

The Inflation Reduction Act changed a wide range of tax laws and provided funds to improve our services and technology to make tax filing easier for you.

The IRS is also taking an additional step to help those who paid these penalties already. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits. Many of these payments will be completed by the end of September.

The relief is aimed at resolving a quandary caused by the tax agency's decision to suspend notices that taxpayers owed money. Although the IRS never sent the notices, penalties continued to mount for taxpayers in arrears.

Considering the circ*mstances surrounding the coronavirus pandemic, the IRS's decision to destroy approximately 30 million unprocessed tax year 2019 paper-filed information returns was “reasonable,” the Treasury Inspector General for Tax Administration (TIGTA) concluded in a report released last week.