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Jun 18, 2024 09:00 PM EDT
By closing a significant tax loophole for affluent taxpayers, the IRS may bring in more than $50 billion in revenue over the next ten years. stated on Monday the Treasury Department.
Planning to effectively end "partnership basis shifting"-a technique by which an individual or company transfers assets around several connected parties in order to evade paying taxes-is part of the guidelines and decision that were unveiled on Monday. The method has no other economic advantage beyond evading taxes, according to the Treasury Department, which called it "abusive."
The IRS is pushing to audit more affluent tax evaders in an attempt to generate income, and this is congruent with the campaign to close the loophole. The Inflation Reduction Act, which President Joe Biden signed into law in 2022, allocated the tax agency an additional $80 billion in budget. According to authorities on Monday, this has allowed for better supervision and knowledge of the practice of base shifting.
After assessing the practice, Biden administration officials declared that there is no economic justification for these transactions; Wally Adeyemo, the deputy secretary of the Treasury, described them as "really just a shell game."
The IRS had reduced the number of audits it conducted of affluent people as a result of underfunding in prior years, and asset transfers between partnerships and corporations had become more frequent.
According to the IRS, from 174,100 in 2010 to 297,400 in 2019, the number of files for big pass-through entities utilized for the kind of tax evasion covered by the guidelines climbed by 70%. However, throughout the same period, these companies' audit rates decreased from 3.8% to 0.1%.
The IRS has stated that it intends to dramatically expand audits over the next three tax years, but it has also reaffirmed that it would not step up enforcement for individuals who make less than $400,000 per year, which is the majority of American taxpayers. Rather, it intends to raise the audit rates to 16.5% from 11% in 2019 for affluent people with earnings over $10 million.
The pursuit of individuals and companies who falsely deduct personal trips from corporate planes and the recovery of unpaid taxes from delinquent millionaires are among the other measures that have been revealed in the last year.
The Inflation Reduction Act, signed into law by President Joe Biden in 2022, has significantly bolstered the resources available to the IRS, allocating an additional $80 billion to the agency's budget. This substantial funding increase is poised to transform the IRS's ability to enforce tax laws and close loopholes that affluent taxpayers have exploited.
With the additional funding, the IRS has been able to enhance its supervision and understanding of complex tax evasion practices such as partnership basis shifting. The increased budget has allowed the agency to invest in better technology, hire more skilled personnel, and conduct more comprehensive audits. These improvements have enabled the IRS to more effectively identify and address abusive tax practices, ensuring that taxpayers cannot manipulate asset transfers to reduce their tax liabilities unfairly.
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The infusion of funds from the Inflation Reduction Act has also improved the IRS's audit capabilities. The agency now has the resources to conduct more thorough and frequent audits, particularly targeting high-income individuals and large corporations that are more likely to engage in sophisticated tax avoidance schemes. This enhanced audit activity is critical in detecting and deterring tax evasion, helping to ensure that all taxpayers pay their fair share.
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