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More Money, More Problems: IRS Further Targets "Wealthy" Taxpayers with New Special Team

By Anthony P. Daddino on September 21, 2023
After announcing the hiring of new agents to audit the “wealthy,” the IRS marches further down the war path by establishing a special pass-through organization to help with high-income compliance efforts.

Yesterday, the IRS announced plans to establish a special group to focus on large or complex pass-through entities, including partnerships and S corporations (linked HERE). The new work group will initially be housed in the IRS Large Business and International (LB&I) division, although the IRS has plans to include employees from the Small Business/Self Employed division. The special group will be home to the anticipated new hires that the IRS announced last week (see prior Blog post, linked HERE).

"This is another part of our effort to ensure the IRS holds the nation's wealthiest filers accountable to pay the full amount of what they owe," said IRS Commissioner Danny Werfel. "We are honing-in on areas where we believe non-compliance among our wealthiest filers has proliferated over the last decade of IRS budget cuts, and pass-throughs are high on our list of concerns. This new unit will leverage Inflation Reduction Act funding to disrupt efforts by certain large partnerships to use pass-throughs to intentionally shield income to avoid paying the taxes they owe. These efforts are consistent with our broader commitment to use Inflation Reduction Act dollars to end the era of historically low error rates for wealthy and large entities, while making sure middle- and low-income filers continue to see no change in audit rates for years to come.”

According to the Commissioner, the IRS’ efforts are necessary to “restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation's tax laws.” While we have a progressive taxing system, the ever-narrowing focus on “wealthy” taxpayers does beg the question: Is the IRS engaged in selective enforcement? While defending “wealthy” taxpayers may be an unpopular notion, there is no question that the IRS has a duty to apply the tax laws fairly and uniformly. Depending on your perspective, the IRS’ efforts – ignoring noncompliance at certain levels and not others – could be viewed as decidedly unfair.

If you have any questions about this blog post or any other tax-related topic, feel free to contact me at (214) 749-2464 or adaddino@meadowscollier.com.