The IRS is ratcheting up audits on wealthy taxpayers, part of its directive after receiving billions inthrough the Inflation Reduction Act (IRA). The agency has said it wants to go after higher earners who skirt their tax obligations in order to help close the tax gap and raise more money for federal coffers, which will be used for programs like the IRA’s $370 billion in green energy investments.
“This increase in the tax gap underscores the importance of increased IRS compliance efforts on key areas,” IRS Commissioner Danny Werfel said.
“These steps are urgent in many ways, including adding more fairness to the tax system, protecting those who pay their taxes and working to combat the tax gap,” he added.
The IRS has said it won’t increase audits on households earning less than $400,000 annually.
What is a tax gap?
The tax gap is the difference between the estimated taxes that are owed and what is actually paid on time, the IRS said.
It includes three key shortfalls: Taxes that aren’t filed, taxes that are underreported and taxes that are underpaid.
About 85% of taxes are paid voluntarily and on time, the IRS noted.