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IRS “compliance push”

Werfel said there’s “a sea change taking place at the IRS” thanks to this new injection of federal funding — with a massive hiring spree and the deployment of artificial intelligence (AI) and machine learning tools to improve the agency’s visibility on “where the wealthy shield their income.”

The new “compliance push” will begin as soon as October. It follows a successful crackdown earlier this year, when the IRS collected $38 million in delinquent taxes from more than 175 high-income taxpayers over the course of a few months. The agency is now scaling up that effort, according to Werfel.

The IRS announcement has gone down well with certain parties. Congressman Bill Pascrell (D-NJ) shared his support on X (formerly Twitter): “The IRS is opening a historic crackdown on rich tax cheats that steal from you.”

Meanwhile, Americans for Tax Fairness posted: “This is what happens when you give the IRS the funding it needs to catch rich tax cheats.”

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Disputes over funding

While most would agree that catching tax cheats is good for U.S. society as a whole, politicians remain in dispute around how to fund such a monumental task.

It is well-known that House Republicans are less than happy about the infusion of cash into the IRS — especially after the U.S. debt ceiling drama this year.

The federal tax agency was in line for roughly $80 billion over 10 years through the Inflation Reduction Act — with $45.6 billion from that total targeted specifically toward boosting enforcement, especially around big businesses and the wealthy tax evaders. However, in order to reach bipartisan consensus to suspend the country’s debt limit until January 2025, President Biden has already rescinded over $20 billion of IRS funding.

But financial challenges are no stranger to the IRS, which has been woefully underfunded and understaffed for a decade.

Werfel remains adamant that the agency will turn the tide, stating: “The years of underfunding that predated the Inflation Reduction Act led to the lowest audit rate of wealthy filers in our history. I am committed to reversing this trend, making sure that new funding will mean more effective compliance efforts on the wealthy, while middle- and low-income filers will continue to see no change in historically low pre-IRA audit rates for years to come."

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About the Author

Bethan Moorcraft

Bethan Moorcraft

Reporter

Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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