Insights
Publications

IRS Moves to Target Wealthy Taxpayers in Historic Compliance Drive

September 21, 2023 Articles

This month, the IRS announced that it is using the long-term funding approved by Congress through the Inflation Reduction Act of 2022 to shift its attention to wealthy taxpayers in an effort to “identify sophisticated schemes to avoid taxes.”

This effort, which is being labeled a “historic effort to restore fairness in tax compliance,” comes after years of low audit rates for higher income and wealthy taxpayers. Danny Werfel, IRS Commissioner, stated that the new strategy makes good on the promise of the Inflation Reduction Act to hold wealthy taxpayers accountable “to pay the full amount of what they owe.”

According to the announcement, IR-2023-166, the IRS will leverage advanced data analytics and technology to identify discrepancies and inconsistencies in tax filings more effectively. The changes will help better “detect tax cheating, identify emerging compliance threats and improve case selection tools to avoid burdening taxpayers with needless ‘no-change’ audits.” In other words, the agency will be able to target audits with greater precision.

Although the IRS has not publicized all the details of its new strategy, individuals with substantial assets and complex financial situations, which the announcement suggests includes taxpayers with income above $1 million, may face a higher likelihood of audit as a result of these measures. Estate planning strategies designed to permit the tax-free transfer of wealth from generation to generation are likely to come under greater scrutiny. Anecdotally, we have seen an increase in IRS resources devoted to estate tax audits, as well.

The IRS reports that it will “intensify work” on high-end collections cases as part of the High Wealth, High Balance Due Taxpayer Field Initiative. The agency hopes to build off its earlier successes in collecting over $38 million from 175 high wealth taxpayers by focusing on these cases in fiscal year 2024, which runs from October 2023 to September 2024.

Other explicit priority areas for the IRS include partnership compliance work; expanded efforts involving digital assets, including last month’s release of proposed regulations that broaden the definition of “broker” for information reporting of digital asset dispositions; and greater scrutiny of taxpayers with foreign bank accounts, who are required to report aggregate balances of more than $10,000.

Our lawyers have been following the agency’s transformation efforts closely. For more information, please contact the authors or your regular Farella Braun + Martel contacts.

Firm Highlights

Publication

Navigating Charitable Bequests: Risks and Rewards for Early Planning

Charitable bequests are an essential aspect of philanthropic planning for high net worth individuals. When engaging in conversations with philanthropic clients, it is crucial to help them determine suitable assets for charitable giving. Not...

Read More
Publication

Steps for the Long-term Success of Your Brand & Business

Family wineries face certain common issues when it comes to succession planning, and there are steps you can take to help ensure the longevity and success of your brand and business. Step 1 &ndash...

Read More
Publication

Charitable Planning With Guest Stephanie Hood: Navigating Complex Rules and Traps for the Unwary

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . This week, I am delighted to have Stephanie Hood return as my guest. Stephanie is my colleague at Farella Braun + Martel and...

Read More
Publication

REFRESH: Loot and Private Foundation Rules – Part 2

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . In this episode, I refresh  EO Radio Show  episode 22, the second of our two episodes exploring private foundation rules using commentary on the...

Read More
News

Farella Announces 2024 Leadership Council on Legal Diversity Pathfinders: Taylor Rottjakob and John Ugai

Farella Braun + Martel is proud to announce that senior associates  Taylor E. Rottjakob and John M. Ugai have been named 2024 Leadership Council on Legal Diversity (LCLD) Pathfinders. Pathfinders have been identified as...

Read More
Publication

REFRESH: Loot and Private Foundation Rules – Part 1

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . In this episode, I'm happy to refresh  EO Radio Show  episode 21, the first of our two episodes exploring private foundation rules using the...

Read More
Publication

Corporate Transparency Act: A Guide on Beneficial Ownership for Nonprofit Executives

The Corporate Transparency Act, enacted as part of the National Defense Authorization Act for Fiscal Year 2021, represents a significant shift in regulatory requirements for entities across the United States. This act, set to...

Read More
Publication

A Summary of New Laws Coming for California Employers in 2024

In 2023, California has adopted several new employment laws either introducing new employee protections or codifying existing practices into state law. With these changes, employers will need to examine and adjust some of their...

Read More
Publication

Navigating Charitable Bequests: Risks and Rewards for Early Planning

Charitable bequests are an essential aspect of philanthropic planning for high-net-worth individuals. When engaging in conversations with philanthropic clients, it is crucial to assist them in determining suitable assets for charitable giving. Not all...

Read More
Publication

Charitable Bequests With Guest Stephanie Hood

Welcome to EO Radio Show – Your Nonprofit Legal Resource . I'm delighted to have as my guest Stephanie Hood, my colleague here at Farella Braun + Martel, and a member of our top-notch...

Read More