IRS eyes millionaires and tax credit scams
This Week's Quote:
“In a world where you can be anything, be kind."
- Jennifer Dukes Lee
IRS Commissioner Danny Werfel has announced that the IRS is going after 1,600 millionaires who owe at least $250,000 each and collectively owe hundreds of millions of dollars, as part of an expanded push to make sure that wealthy taxpayers pay what they owe.
Also on the IRS radar: large partnerships; construction firms issuing sketchy paperwork to “shell” companies that kick back the money to the original contractor, schemes already spotted in Texas and Florida; and wealthy people who are not reporting and paying taxes associated with money held in foreign bank accounts.
“We have the ability now to see where income is being shielded where it should not be shielded,” Werfel said Friday.
Artificial intelligence technology is being used by the IRS to spot trends and patterns of behavior for skirting taxes owed.
Werfel said 75 of the largest partnerships in the United States – including law firms, hedge funds and others – will be audited. On average, the IRS said, these partnerships each have more than $10 billion in assets. No estimate was given for how much might be collected from this group or how much income might being shielded from taxes.
Starting in October, Werfel said, the IRS will send a special compliance alert to about 500 additional large partnerships where the numbers don’t seem to be adding up, based on balance sheet discrepancies. He said the added funding that Congress provided to the IRS through the Inflation Reduction Act helps make this more comprehensive effort possible.
High-income taxpayers who use foreign bank accounts to avoid disclosure and related taxes will also be targeted, the IRS stated, and the IRS plans to audit the most egregious cases in fiscal 2024.
An IRS multiyear analysis indicated that hundreds of people who have average foreign account balances of more than $1.4 million are possibly not following the rules. They must file required paperwork when the aggregate value of all foreign financial accounts is more than $10,000 at any time.
Werfel noted that the IRS also will be targeting those generating schemes that use the tax system to engage in fraud – such as promising people inflated refunds based on the Earned Income Tax Credit or tricking people into tax-related identity theft.
The IRS said it is making improvements in audits involving Earned Income Tax Credits and will be implementing changes for the next filing season. More details on this will be available in the fall.
Credit goes to Susan Tompor. Published September 12, 2023 in USA Today.
Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.
This Week’s Author, Belinda Stickle
-until next week
