IRS to Close Loophole, Boost Tax Revenue by Billions
“Tax the Rich”: IRS Targets Large Partnerships to Close Loopholes and Boost Revenue
The Internal Revenue Service (IRS) is taking aim at “large, complex partnerships” in an effort to collect billions of additional tax dollars. This move aligns with the controversial slogan “tax the rich,” which gained attention when New York Democratic Rep. Alexandria Ocasio-Cortez wore it on a dress at the 2021 Met Gala.
The IRS’s focus on closing loopholes and cracking down on known tax evasion tactics could result in a significant increase in revenue for the government. This recommendation comes from a report by the U.S. Government Accountability Office, which serves as the government’s internal watchdog.
The report specifically suggests that the IRS prioritize audits of large partnerships, which have seen a 600 percent increase in numbers between 2002 and 2019. These partnerships, defined as organizations with over $100 million in assets and 100 or more partners, have been able to pass income and losses onto their partners, avoiding corporate taxes.
However, audits of these partnerships have significantly declined over the years. In 2019, out of more than 20,000 such entities, only 54 were subjected to additional IRS scrutiny. Even these limited audits have yielded minimal tax adjustments, with more than 80 percent resulting in no change to the return on average.
The complexity of these partnerships’ structures has contributed to the decline in audits. They can be hidden within other partnerships, creating intricate networks that are challenging for auditors to navigate. Additionally, the IRS has cited resource constraints as another obstacle to conducting thorough audits.
To address these challenges, the Inflation Reduction Act allocated $45.6 billion for enforcement activities through 2031. While this amount was slightly reduced in a recent budget deal, the government remains committed to making large partnerships an enforcement priority.
Former IRS commissioner Charles Rettig estimates that the “tax gap” for these businesses, the amount owed but not collected by the IRS, could be as high as $1 trillion for 2022. However, the Treasury Department has pledged to hire experienced professionals to ramp up enforcement and ensure that wealthy individuals, large corporations, and big partnerships pay their fair share of taxes.
The IRS’s efforts to close loopholes and collect additional tax revenue are poised to have a significant impact on the nation’s finances. By targeting large partnerships and addressing the complexities and resource constraints that have hindered audits in the past, the government aims to ensure tax fairness and boost its coffers.
Source: The Western Journal
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