$122 million windfall as IRS says it’s made 100 wealthy taxpayers pay what they owe

The IRS has already sweated $122 million out of 100 wealthy taxpayers, the agency announced Friday, celebrating early returns in the Biden administration’s campaign to make the rich pay what they owe to Uncle Sam.

The 100 taxpayers are part of a larger group of 1,600 wealthy people the IRS identified for its first round of enforcement. They were selected because they have million-dollar incomes and already had more than $250,000 in tax debt.

Among the cases is one person who was ordered to pay $15 million to the government to make up for claiming massive bogus tax deductions, such as writing off a 51,000-square-foot mansion, country club memberships and homes for his children.

The IRS said the effort to target the wealthy is possible because Congress gave the agency tens of billions of dollars in new money in last year’s budget-climate law.

Some of that money has been used to improve abysmal levels of customer service at the IRS, where most taxpayers’ phone calls went unanswered during filing season.

The IRS said it made big strides in customer service this year, and now it’s turning to the enforcement side of the equation to try to get Americans to pay what they owe.

Among initiatives announced Friday are a new round of warnings to foreign companies that distribute goods in the U.S. The IRS says they use gimmicks in pricing to avoid reporting the real value of products and shirk paying on it all.

The IRS said it is sending alerts to roughly 150 U.S. subsidiaries to “incentivize self-correction.”

The agency’s announcements come just days after it announced new estimates for the “tax gap” — the difference between what Uncle Sam says he’s owed each year, and what taxpayers actually send in. The IRS said it lost out on more than $600 billion in 2021.

The IRS figures about 85% of taxpayers voluntarily pay in full and on time. After audits and enforcement, total compliance in 2021 reached 86.3%.

That leaves a lot of money uncollected, the agency said.

About 10% of the tax gap is from people who fail to file tax returns altogether, and another 11% is from people who file their returns on time but don’t pay by the deadline.

The vast majority of the problem — some 79% of the tax gap — is from people underreporting their incomes or overselling their exemptions and deductions.

Individuals are also significantly more likely than corporations to skimp on their taxes. The IRS says individual income tax filers get it right, and on time, 80.9% of the time. Corporate taxes, meanwhile, are paid correctly and on time 85.2% of the time.

Payroll taxes are paid in full and on time 91.9% of the time. Estate taxes are paid in full 81% of the time.

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