American millionaires are routinely underpaying their fair share of federal taxes and likely owe the IRS more than $2.4 billion that has gone uncollected over the past few years, according to the Treasury Department.
The government was only able to collect about 39% of an estimated $4 billion in unpaid taxes by the nation’s most wealthy who bring home an annual salary of about $1.6 million, Bloomberg News reports.
The report by the Treasury Inspector General for Tax Administration found an eyebrow-raising 1,014 taxpayers who reported 2019 incomes of more than $5 million, but who paid less than $100,000 in taxes. Among that same group, 632 owed less than $10,000 back to the federal government.
The nation’s richest citizens were likely able to shirk Uncle Sam because the government places little emphasis on higher incomes when deciding which taxpayers should be audited, according to Bloomberg.
“Instead, it places more significance on other factors, such as the dollar amount of the balance due,” J. Russell George wrote in the report that was released Monday. “With its limited resources, it is important to determine if the IRS is effectively addressing nonpayment by high-income taxpayers.”
The government accountability report is recommending the IRS update protocols that would put high-income earners more on the radar.
The watchdog also found that the IRS consistently identifies deficient tax returns but at the same time the agency had failed to elevate those cases to its collection enforcement department.
Further, the report suggests the IRS begin a side-by-side comparison of an individual’s income vs their outstanding tax to determine who should be prioritized for collections, Bloomberg reports.
In response, the IRS objected to the overall assessment made in the report.
“The IRS asserts that its predictive models used in case selection are built on robust historical datasets,” the agency stated in the report. “It further asserts that its model building process determines which variables are most effective in accurately estimating the percent of delinquent taxes that will be collected, and how these variables should be weighted.”
Democrats on Capitol Hill are also looking into legislation that would increase audits among wealthy businesses and individuals.
“The inspector general’s report reiterates wealthy tax cheats are stealing billions from the American people,” said Ron Wyden, chairman of the Senate Finance Committee. “Importantly, the report notes the IRS could make significant progress in cracking down on tax cheats by focusing on those who make the most money and owe the most in unpaid tax bills.”
Last year the IRS announced plans to increase audits on small businesses and investors by 50% this year, Bloomberg reported.
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