(DailyDig.com) – During the next ten years, the IRS intends to raise over $50 billion in revenue from wealthy taxpayers who are not paying their taxes. A significant loophole has allowed these taxpayers to move their assets between a number of related partners, thereby avoiding paying the taxes they owe on those assets.
The US Treasury Department announced the rule on June 17, which will stop the shifting of assets between partnerships. Wally Adeyemo, the deputy Treasury secretary, claims that Biden’s administration officials reviewed the practice and determined it was not based on any economic reasons other than playing a “shell game.”
The funding for this review came from the 2022 passage of the Inflation Reduction Act, which improved oversight regarding the practice. Danny Werfel, the IRS commissioner, stated that wealthy taxpayers used the tax shelter to keep from paying what they owed in taxes.
The IRS had previously reduced their auditing due to being underfunded, which allowed the shifting of assets to become a common practice between partnerships within companies. The number of filings that utilized that form of tax avoidance increased 70 percent from 2010 to 2019.
The Treasury stated that they estimate a $160 billion difference between what these businesses owe and what they pay, with the upper one percent of US earners being the primary contributor. Some of the other tactics that the Treasury said they planned during the past year include going after millionaires who are delinquent in paying their taxes owed and finding people who claim deductions incorrectly.
The June 17 announcement is the result of the IRS’s effort to clamp down on tax cheats who are wealthy and try to avoid using the tax code properly, as well as those who just do not pay the taxes that they rightfully owe the government.
In order to accomplish their plan, the IRS will increase the rates of their audits on businesses with $250 million in assets to 22.6 percent in 2026. In 2019, the rate was 8.8 percent. For companies with $10 million or more in assets, audits will increase tenfold.
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