The IRS is entering the next phase of its multi-pronged push to curb tax avoidance among large corporations and wealthy individuals, improve online and in-person customer experiences and digitize its filing system, announcing new initiatives Friday funded by the Inflation Reduction Act.
In an attempt to stop large foreign-owned corporations from improperly engaging in transfer pricing — wherein those companies report losses and low margins to avoid accurate reporting of U.S. profits — compliance alerts are being sent to roughly 150 subsidiaries of firms that fit that bill, reiterating their American tax obligations and urging self-correction.
The IRS is also expanding its Large Business & International Division’s Large Corporate Compliance, a move that leverages data analytics to pinpoint which large corporate taxpayers merit an audit. The program, which will boast an expanded accounting staff by early next year, will perform an additional 60 audits of the biggest corporate taxpayers, as identified by artificial intelligence and subject matter experts.
The IRS said it has already seen major wins thanks to its IRA-funded programs targeting tax-avoiding individuals. The agency noted in a release that enforcement efforts on high-income, high-wealth people who have not filed taxes or failed to pay tax debt has resulted in collections of more than $122 million in over 100 cases. Roughly 1,600 new taxpayers that fall into that category are being contacted by the agency.
The tax agency announced last month that it would use artificial intelligence and other technology to crack down on millionaires and organizations who have avoided paying their taxes.
Among the individuals caught by the agency were a person ordered to pay more than $15 million after falsifying millions in expenses to build a 51,000-square-foot mansion and another person who was sentenced to 54 months in federal prison after fraudulently securing $5 million in COVID-19 relief loans for fake businesses and using those funds to buy multiple sports cars.
From a customer experience standpoint, the agency said it’s focused on improving interactions between taxpayers and IRS staff, whether it’s online or in-person. The agency is now operating 50 Taxpayer Assistance Centers across the country, including eight that have opened since the one-year anniversary of the IRA.
And on the modernization front, the IRS said it has made “significant progress” on digitization efforts, particularly in scanning and e-filing paper returns. The agency so far this year has scanned more than 1 million tax forms.