Advisors express confidence wealthy clients will avoid IRS crackdown
Investment advisors expressed confidence their clients won’t be among those targeted by the IRS in an initiative that cracks down on wealthy tax cheats.
The IRS announced Friday that it would use funding from tax and climate legislation approved last year to increase scrutiny of high-income earners, partnerships, large corporations and promoters who abuse tax laws. Audit rates for taxpayers in those segments have fallen sharply over the past decade, the agency said, while audits for those claiming the Earned Income Tax Credit have remained high.
Money allocated to the IRS by the Inflation Reduction Act will finance the effort to ensure the wealthy pay their fair share of taxes, according to the agency. It said audit rates would not increase for people earning less than $400,000 annually.
“This new compliance push makes good on the promise of the Inflation Reduction Act to ensure the IRS holds our wealthiest filers accountable to pay the full amount of what they owe,” IRS Commissioner Danny Werfel said in a statement. “The years of underfunding that predated the Inflation Reduction Act led to the lowest audit rate of wealthy filers in our history. I am committed to reversing this trend, making sure that new funding will mean more effective compliance efforts on the wealthy, while middle- and low-income filers will continue to see no change in historically low pre-IRA audit rates for years to come.”
The IRS said it will intensify its scrutiny of people who earn more than $1 million annually and have more than $250,000 in recognized tax debt. The agency will build on a previous program that collected $38 million from 175 high earners. In the next fiscal year, it will target 1,600 taxpayers who owe millions in taxes.
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