An initiative to collect tax debts from millionaires has brought in over $1 billion in less than a year, the Internal Revenue Service and the Treasury Department announced Thursday.
Launched in September 2023, the effort involved dozens of IRS employees reaching out to 1,600 taxpayers who had more than $1 million in income and owed more than $250,000 in taxes.
"This initiative has been a huge success," Treasury Secretary Janet Yellen told reporters on a press call. "The IRS has collected $1 billion from millionaires and shown that it can successfully launch new strategic initiatives and get a significant return on investment."
She and IRS Commissioner Danny Werfel stressed the impact of increased funding — and particularly the extra money made available by the Inflation Reduction Act — in enabling the agency to collect on delinquent taxes.
"Investments in enforcement technology and data, if sustained, will result in $851 billion in additional revenue over the next decade," Yellen said. "Today's milestone shows that efforts to increase tax fairness and bring in revenue from high-end taxpayers who have not paid what they owe will pay off."
Werfel described the work that went into collecting the $1 billion: "The effort has a variety of different steps," he explained. "First you identify the delinquent balance due and you confirm it, and then the first outreach to the taxpayer is a letter to their home. We give them a reasonable amount of time to respond with a dispute or a payment. A lot of the taxpayers we reach out to don't respond, or we end up with a lot of back and forth to convince the taxpayer that they owe and that it's in their best interest to pay. These cases typically get closed after a lot of back and forth after that initial letter. In cases where they don't remit payment, levies can be introduced."
Funding from the IRA was key to freeing up staff to identify the cases and then do the necessary follow-up.
"Too often during the past decade, the IRS didn't have the resources to pursue high-income taxpayers to follow up with these people — even though their tax bill wasn't in dispute," said Werfel. "It takes time and effort to follow up, and the IRS was stretched too thin to pursue all these cases."
"Our increased work means that past-due taxes from high-income taxpayers are no longer being left on the table," he said. "If we're not following up, we know the taxpayers will hold back — we know that. Follow-up is critical."
Wait — there's more
The 1,600 taxpayers are only one group the IRS is looking at, Werfel said.
"We have another group of prosperous households that haven't filed tax returns at all," he said. "Inflation Reduction Act funding allowed us to restart our non-filer program, which had been dormant due to a lack of funding."
The IRS has already mailed notices to 125,000 households with income above $400,000 that haven't been filing tax returns, and while it's too soon to see results in terms of money, it and similar initiatives can immediately play a role in reversing a dangerous idea that's growing around taxes.
"When the IRS is not meeting its mandate and responsibility to enforce the tax laws, it creates an atmosphere where an increasing number of people think they cannot pay or file their taxes without consequences," Werfel said. "That's why efforts like this are so important. This puts other high-wealth taxpayers on notice that it's not in their best interest to not pay their taxes."
"One of the root causes is the implication that we don't have the ability to do our job," he continued. "I hope that that notion will start to dissipate and disappear among these taxpayers."
One cause of that impression is low audit rates, which Werfel noted had fallen sharply over the past decade, to historic lows.
"But we are turning the corner, thanks to the funding we received from the Inflation Reduction Act," he said. "We have a lot of work under way to transform the IRS. We are starting to make real inroads on compliance in some long-neglected areas."
In response to a question about recent
"We want to eliminate zero-balance-due audits," he said. "There's a combination of steps to take to eliminate zero-change audits, because the way income is shielded inappropriately has evolved. That's why we need subject matter expertise and new ways of doing data science, and we need more people, because these are voluminous and complex returns. If we send in a team that's too small to absorb the complexity of the financial environment of that business, we're going to miss things."
Training revenue officers is critical, but the IRS also needs other types of experts, according to Werfel. Behavioral scientists, for instance, can help the agency write better letters aimed at taxpayers and make notices clearer and easier to understand, thus improving overall response rates.
He also pointed out that the agency has been bringing on more accountants.
"We've had significant success as we've ramped up our hiring of accounting skills inside the IRS, so as we're calculating the tax due and the penalties and interest, it's supported by a robust accounting skill set," he said.
The cost of all that extra expertise, Werfel was quick to note, is far outweighed by the extra revenue they help bring in.
"The IRS is a positive return on investment," he said. "When we hire an accountant or a revenue officer or a behavioral science expert, we recover far more than we pay them."
