The Internal Revenue Service said funding it received from the Inflation Reduction Act has allowed the agency to “dramatically improve” services to taxpayers and aided in its goal to continue to ensure that wealthy individuals pay their taxes.
The $1.7 trillion Inflation Reduction Act of 2022 increased the IRS budget by roughly $80 billion over 10 years for its expansion and modernization efforts.
The agency, in a news release, said it was able to achieve an 87% level of service during the 2023 filing season. Its accomplishments included answering three million more calls, cutting phone wait times to three minutes from 28 minutes, reopening tax centers and serving 140,000 more taxpayers in person, digitizing 80 times more returns than in 2022 through the adoption of new scanning technology, clearing a backlog of unprocessed 2022 individual tax returns and launching new digital tools.
The agency also said it stepped up tax enforcement efforts among high-income filers. “Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to hide their income and evade paying their share,” the agency said in a statement. “The IRS is now taking swift and aggressive action to close this gap.”
And what it referred to as “just the start,” the agency said it collected $38 million in recoveries from about 175 delinquent tax cases for millionaires in just the last few months.
Also, the agency said its criminal investigation team has made inroads with dealing with tax evaders. The team “has closed a lengthy list of cases where wealthy taxpayers have been sentenced for tax evasion, money laundering and filing false tax returns,” the agency said. These tax evaders participate in schemes in Puerto Rico and outside the U.S., specifically Malta, where they avoid U.S. taxes.
In the case of Puerto Rico, the agency said, “it has identified about 100 high-income individuals claiming benefits in Puerto Rico without meeting the residence and source rules involving U.S. possessions.” And in Malta, it said there are unlawful pension arrangements.
“As part of our effort to go after unlawful offshore tactics, IRS and Treasury issued proposed rules in June that define Maltese personal retirement schemes used to avoid U.S. taxes as listed transactions. We are already working to identify taxpayers that are improperly using Malta-U.S. Treaty rules to improperly claim exemptions. The IRA will enable us to forcefully find tax avoiders who leverage these offshore schemes,” the agency said.
Also, under close watch are wealthy individuals who skip filing tax returns. “These are particularly egregious cases where instead of filing their taxes and paying their fair share, these people used the money to make lavish purchases,” the agency said, noting that in one recently closed case, an individual used funds owed to the government to buy a Maserati and a Bentley.
“The IRS is continuing to build on this progress focusing on critical work across the agency in achieving world-class service, strengthening enforcement against high-income individuals who do not pay taxes owed, and modernizing core technology infrastructure to enable better service and improve data security.”