The IRS says its 87,000 new employees could help raise up to $1 trillion — by forcing tax cheaters to pay. But can many ‘fire-breathing dragons’ really do that?

The IRS says its 87,000 new employees could help raise up to $1 trillion — by forcing tax cheaters to pay.  But can many 'fire-breathing dragons' really do that?

The IRS says its 87,000 new employees could help raise up to $1 trillion — by forcing tax cheaters to pay. But can many ‘fire-breathing dragons’ really do that?

Get ready, ultra-wealthy Americans: President Joe Biden wants you to start paying your share.

Through the Inflation Reduction Act, Biden plans to increase funding to the IRS to help the agency catch sneaky tax evaders — especially high earners who like to find loopholes in the law.

A Treasury Department report from May 2021 estimates the extra amount would allow the agency to hire about 87,000 new employees — which could include revenue agents, customer service, and IT staff — into year 2031.

Advocates believe the increased funding could raise as much as $1 trillion by forcing tax cheaters to pay fees, especially after years of budget cuts have cut the system. break.

However, some critics worry that increased scrutiny of taxpayers could backfire.

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The IRS desperately needs help

An $80 billion grant spread over the next 10 years will help the IRS modernize its infrastructure, increase enforcement, and replace an aging workforce (50,000 of the 80,000 IRS workers projected will leave in the next 5 years).

According to the report, the agency has been undercapitalized by about 20% for a decade – leading to both staff cuts and technology updates.

Bogged down by a system of processing more than half a century and backlog consists of millions of unprocessed paper recordsThe IRS has been in need of additional resources and support for a while.

The customer service department is also severely understaffed. During the 2022 tax filing season, the IRS received about 73 million phone calls from taxpayers — but only 10% were actually answered.

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“The combination of over 21 million unprocessed paper tax returns, more than 14 million math error reports, an 8-month backlog of taxpayer correspondence, and the particular difficulty of contacting The IRS over the phone makes this tax season particularly difficult,” national taxpayer advocate Erin M. Collins wrote in his mid-year report to Congress.

In addition to these issues, former IRS Commissioner Charles Rettig estimates by 2021 that the agency is losing $1 trillion in unpaid taxes each year — especially as a result of tax evasion by the rich and large businesses. He also pointed out that they can slip through the cracks in part due to the lightly regulated crypto market, foreign income, and abuse of transfer terms.

Rettig has long pushed for increased funding “to bring fire-breathing dragons” to capture cheaters on the quest.

Could increased enforcement do more harm than good?

Proponents argue that the grant will help close the “tax gap” by helping to catch more tax evaders.

Of the total $80 billion, $45.6 billion has been allocated to strengthen law enforcement — this will go toward hiring more law enforcement agencies, providing legal assistance, and investing in invest in “investigative technology” to determine who should or should not audit.

But not everyone is thrilled with the news.

“They’re not going to get this ‘magic money’,” Brian Reardon told Bloomberg. Reardon is the president of the S Corporations Association, which represents privately owned small businesses that pass taxes on to their shareholders.

“If you increase law enforcement against people who follow the rules and pay what they owe, you will create resentment and anger. You undermine people’s trust in the tax system.”

However, the Biden administration insists that increased enforcement will focus on large and extremely wealthy corporations, and not on small businesses or households earning less than $400,000 a year.

Research from the Treasury Department indicates that the top 1% of Americans can evade taxes of up to $163 billion per year.

That being said, while Eli Akhavan, a partner at Steptoe & Johnson in New York, expects the audits to go up, he has told his wealthy clients they “don’t have one” nothing to worry about other than some headaches”, as long as they are following good advice. and have “their ducks in a row.”

“If there is nothing to look for, there will be nothing to find,” Akhavan said.

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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.


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