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IRS reports collecting $1 billion from rich households’ back taxes

The IRS reported Wednesday that it has collected $1 billion in taxes and penalties owed by hundreds of wealthy households who accumulated past-due tax debts for years while IRS enforcement dwindled.

“The tax bill wasn’t even in dispute — the taxes were clearly owed by these people,” IRS Commissioner Danny Werfel said in a call with reporters. “But we didn’t have the people or the resources. … It takes time and staffing to work through these cases.”

The tax agency, boosted by $60 billion in additional funding from the 2022 Inflation Reduction Act, has hired hundreds of skilled accountants over the past year and a half after years of shrinking staffing. Some of them have focused their efforts on specific groups of tax delinquents, including a group of 1,600 households with annual incomes above $1 million who were all known to owe at least $250,000 in back taxes, based on their previous tax returns. Facing understaffing in the past, IRS leaders admit, their agents simply didn’t try to collect these taxes for years.

The new enforcement campaign started last year with letters to at least 1,500 people in the target group, reminding them what they owed, Werfel said. About 100 of them paid a total of $100 million in taxes, interest and penalties in the first month or so, Werfel said.

Others took much more effort, and in some cases, levies on the taxpayers’ assets to collect the money. Werfel described months of letters back and forth between the IRS’s new agents and the millionaires’ accountants and lawyers.

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The push that IRS officials described this week targeted people who filed tax returns but hadn’t paid. The agency is also pursuing a far larger group: wealthy people who haven’t filed returns at all.

The IRS stopped sending letters reminding people that they hadn’t filed in 2017. It resumed the practice this year, notifying as many as 25,000 people who formerly reported annual income above $1 million, as well as up to 100,000 people whose income was above $400,000 a year, that they had skipped filing in one or more recent years.

Werfel said the agency would likely report in the fall how much money those letters have brought in.

“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 believe they can not file or not pay their taxes,” Werfel said. “Announcements like this where we indicate that we are actively working to identify non-filers and delinquent taxpayers … puts other taxpayers on notice.”

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