Tax evasion among the wealthiest Americans exceeds $150 billion annually

The Internal Revenue Service (IRS) of the United States estimates that millionaires and billionaires in the country are evading over $150 billion in taxes annually. Despite a 50% increase in the number of taxpayers earning over $1 million per year, audits for this group have declined by more than 80% over the past decade, as per IRS statistics cited by CNBC.

Audits of taxpayers earning over $1 million a year have declined by more than 80% over the last decade. Illustration photo by Freepik

IRS Commissioner Danny Werfel attributes this decline to prolonged underfunding, which has left the agency understaffed and lacking the necessary technology and resources to conduct audits, especially for complex returns. In response, the IRS has launched an extensive crackdown on wealthy individuals, partnerships, and large companies.

The Treasury Department projects that improved IRS enforcement could generate an additional $561 billion in tax revenues between 2024 and 2034, a figure higher than initially anticipated. The IRS estimates that for every additional dollar invested in enforcement, it can generate approximately $6 in revenues.

The IRS has reported success in a program targeting unpaid taxes from millionaires, recovering over $480 million from 1,600 millionaire taxpayers who failed to pay at least $250,000 each in assessed taxes.

Another area of potential tax evasion highlighted by Werfel is in limited partnerships. Additionally, the IRS is not only focused on detecting instances of tax evasion but also utilizing AI to avoid unnecessary audits for compliant taxpayers. The agency encourages taxpayers to report any income received through illegal activities, such as drug dealing, as per Newsweek's report on February 20th.