US: IRS Recovers $172 Million from 21,000 Non-Filing Wealthy Taxpayers in First Six Months of New Initiative

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On September 6, 2024, the U.S. Secretary of the Treasury Janet L. Yellen and IRS Commissioner Danny Werfel announced significant milestones from the IRS's recent enforcement initiatives aimed at improving compliance among high-wealth taxpayers. During their remarks at the IRS campus in Austin, Texas, they highlighted the role of the Inflation Reduction Act in empowering the IRS to modernize tax enforcement and improve services through the Digital First Initiative.

INITIATIVE OVERVIEW

In February 2024, the IRS launched a targeted effort to identify and pursue 125,000 high-income, high-wealth taxpayers who have not filed tax returns since 2017. These cases involve individuals for whom the IRS has third-party information, such as Forms W-2 and 1099, indicating that they received income between $400,000 and $1 million, or in some cases, more than $1 million, yet failed to file their required tax returns.

Prior to the passage of the Inflation Reduction Act, the IRS's non-filer enforcement efforts were hampered by budget constraints and staffing limitations, leaving many of these cases unaddressed. However, with new funding under the Inflation Reduction Act, the IRS has been able to revive this critical aspect of tax administration.

In the first six months of this initiative, approximately 21,000 wealthy non-filers have complied with their obligations, resulting in the recovery of $172 million in taxes.

EXPANSION OF ENFORCEMENT ON DELINQUENT TAX DEBT

In addition to addressing non-filers, the IRS has intensified efforts to collect recognized tax debts from high-income taxpayers. In the fall of 2023, the IRS launched an initiative targeting high-wealth individuals with over $1 million in income and more than $250,000 in outstanding tax liabilities. Due to previous resource limitations, the IRS had been unable to effectively pursue these cases.

However, leveraging resources from the Inflation Reduction Act, the IRS assigned dozens of senior staff to focus on these cases. This concentrated effort has led to remarkable results. After successfully recovering $38 million from 175 high-income taxpayers in 2023, the IRS expanded the program to target an additional 1,600 high-wealth individuals.

IMPRESSIVE RESULTS

Nearly 80% of the identified 1,600 millionaires have since made payments toward their tax debts, contributing to over $1.1 billion in recovered revenue. Notably, since July 2024 alone, an additional $100 million has been collected, building upon the milestone achievement of $1 billion announced earlier this year.

CONCLUSION

The recovery of $172 million from non-filers in the first six months of the new initiative, alongside the continued success in collecting delinquent tax debt from high-income individuals, demonstrates the effectiveness of the IRS’s enhanced enforcement capabilities under the Inflation Reduction Act. With improved resources and a focused approach, the IRS is taking meaningful steps to ensure that wealthy individuals meet their tax obligations, further contributing to overall tax fairness and compliance.

The success of these efforts also underscores the importance of sustained investment in the IRS’s technology and workforce to maintain momentum in enforcing compliance and closing the tax gap.

SOURCES/ RECOMMENDED READ:

• U.S. Department of the Treasury Press Release: This official press release outlines the IRS's recovery efforts and the successes achieved under the Inflation Reduction Act initiatives.