IRS Has Raked In More Than $1 Billion in Back Taxes From the Rich

“With this collection activity, the IRS passed an important milestone in our effort to improve compliance and ensure fairness in the tax system,” IRS Commissioner Danny Werfel said in a statement on July 11. “Our increased work in this area means these past-due tax bills from high-end taxpayers are no longer being left on the table, like they were too often in the past.

“Years of funding declines meant the IRS couldn’t get to money that we knew was owed, but we simply didn’t have the resources or staffing to collect,” he added. “Funding from the Inflation Reduction Act is reversing a decade-long decline in our compliance work, including increasing our compliance work involving the wealthiest individuals and groups with tax issues. The collection results achieved in less than a year reveal the magnitude of what can be achieved over the long run as our Inflation Reduction Act enforcement continues to ramp up in the months ahead.”

The IRS noted it has increased collection activities specifically on 1,600 individuals whose incomes were more than $1 million per year and who each owed the IRS more than $250,000 in tax debt. Of those 1,600 cases, the IRS assigned 1,500 to revenue officers, with more than $1 billion collected thus far. The $1 billion collected through spring represents payments from over 1,200 individuals, with the IRS saying on Thursday the amount of back taxes collected is expected to grow in the months ahead.

The agency said last October that it had collected $122 million from 100 wealthy taxpayers, in addition to $38 million the agency collected from more than 175 other high-income earners earlier in 2023. Then in January, the IRS said it had collected an additional $360 million in overdue taxes from millionaires.

IRS data from 2017 to 2020 revealed that 1.4 million wealthy individuals failed to file federal tax returns. These unfiled returns are tied to an estimated $65.7 billion in unpaid taxes. Data also show that many of these non-filing millionaires are not one-time offenders. For example, 10,272 of the millionaires identified failed to file more than one year of required tax returns. 

The agency has launched several initiatives targeting complex partnerships, large corporations, and wealthy individuals who don’t pay overdue tax bills in an effort to close the tax gap—the difference between the total taxes owed to the federal government and how much is collected on time.

Earlier this year, the IRS announced a new effort focused on high-income taxpayers who have failed to file federal income tax returns in more than 125,000 instances since 2017. Non-filers receive IRS compliance letters alerting them that the agency is aware of their missing returns and are encouraged to file or contact the IRS. The new initiative involves more than 25,000 people with more than $1 million in income, and over 100,000 people with incomes between $400,000 and $1 million between tax years 2017 and 2021.

These cases involve the IRS receiving third-party information—such as through forms W-2 and 1099—indicating these taxpayers received income in these ranges but failed to file a tax return. The IRS anticipates having more details related to this non-filer initiative later this year.

The IRS is making this information available to show that its compliance efforts are working because of funding the agency received from the Inflation Reduction Act.

In addition to its fiscal year 2023 annual appropriation of $12.3 billion, the IRS received approximately $79.4 billion in supplemental funding over a 10-year period when President Joe Biden signed the Inflation Reduction Act into law in August 2022. Approximately $1.4 billion of that funding has been rescinded by lawmakers as part of debt ceiling negotiations. Another $20 billion or so will be cut and repurposed as part of the agreement in June 2023 between Biden and then-House Speaker Kevin McCarthy to suspend the debt limit and cap federal agency spending.

The IRS is now bracing for a potential Republican takeover of the White House and Congress that could mean massive future budget cuts. House Republicans’ FY 2025 proposal out of the Financial Services and General Government Subcommittee in June proposes further cuts to the IRS in 2025, including to the Direct File program that is being expanded to allow Americans to file their taxes directly with the IRS, the Associated Press reported.