The U.S. Treasury Department announced a significant milestone in its crackdown on tax evasion among the nation's wealthiest individuals, revealing that the IRS has recovered $1.3 billion in unpaid taxes since launching a targeted enforcement campaign last year. The initiative, which was funded by President Joe Biden's Inflation Reduction Act (IRA), underscores the administration's commitment to closing the tax gap and ensuring that high-income earners pay their fair share.
Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel marked this achievement with a visit to an IRS campus in Austin, Texas, where they emphasized the importance of robust tax enforcement in maintaining the integrity of the tax system. Yellen highlighted a troubling statistic: in 2019, the top one percent of wealthy Americans owed more than one-fifth of all unpaid taxes, shifting the burden onto ordinary taxpayers. "To fix this, we've channeled IRS funding toward significant investments to combat tax evasion," Yellen stated during her speech.
The IRS's aggressive approach has yielded impressive results. Since the program's inception, nearly 80% of the 1,600 millionaires targeted for delinquent tax debt have made payments, contributing to over $1.1 billion in recovered funds. Additionally, a separate initiative launched in February 2024 has recouped $172 million from 21,000 high-income individuals who have failed to file tax returns since 2017.
The success of these efforts has been attributed to the increased funding provided by the IRA, which has allowed the IRS to modernize its operations and enhance its enforcement capabilities. The agency has been able to update its 65-year-old technology and introduce more digital tools in the last two years than in the previous two decades. One such tool is the Direct File program, which allows taxpayers with simple returns to electronically file directly with the IRS. Initially piloted in 12 states during the 2024 tax season, the program will be expanded to all 50 states in 2025.
However, the crackdown on wealthy tax evaders has not been without controversy. Republicans have criticized the increased funding for the IRS, arguing that it could lead to overreach and unnecessary harassment of taxpayers. Former President Donald Trump, who is running for re-election, has vowed to drastically cut spending on federal agencies, including the IRS. Trump's campaign has repeatedly attacked the IRA's provision to hire more IRS employees, framing it as an effort to target ordinary Americans, despite evidence that the agency's focus has been on high-income earners with significant tax liabilities.
The IRS's efforts have been bolstered by the Biden administration's broader strategy to close tax loopholes and enforce existing tax laws more effectively. Earlier this year, the agency announced plans to close a major loophole known as "basis shifting," a tactic used by the wealthy to avoid taxes by transferring assets to related parties. The IRS estimates that this could generate more than $50 billion in additional revenue over the next decade.
As of March 31, 2024, the IRS has spent $5.7 billion of the $57.8 billion allocated to it under the IRA. This funding has been used not only for tax enforcement but also for operations support, business system modernization, and taxpayer services. The increased resources have enabled the IRS to pursue cases that might have been overlooked in the past due to a lack of manpower and outdated technology.
Despite the pushback from Republicans, the Treasury Department is steadfast in its commitment to rigorous tax enforcement. Yellen and Werfel's visit to the IRS campus in Austin served as a reminder that the agency's efforts are yielding tangible results and that the focus remains squarely on ensuring fairness in the tax system.
