IRS Intensifies Enforcement Measures Targeting Wealthy Taxpayers and Large Partnerships

The Internal Revenue Service (IRS) has unveiled a comprehensive plan to bolster its enforcement efforts aimed at high-net-worth individuals and large partnerships. Under this initiative, there will be rigorous enforcement actions and scrutiny of tax returns filed by specific categories of high-net-worth individuals. The Inflation Reduction Act of 2022’s fund allocation is fueling these enforcement actions, enabling the IRS to address areas that have long been underfunded. The categories to be targeted include:

• 75 of the largest partnerships with over $10 billion in assets;
• 500 multimillion-dollar partnerships with over $10 million in assets; and
• 1,600 individual millionaires with total incomes above $1 million and recognized tax debt exceeding $250,000.

To enhance their efficiency, the IRS is employing advanced technology, including artificial intelligence (AI), to identify tax returns for examination. This technology, developed through collaboration with data science and tax enforcement experts, allows the IRS to discern patterns and trends that were previously elusive.

Further, the IRS will establish a new, specialized unit dedicated to examining large and complex pass-through entities. This new unit will operate within the IRS’ Large Business & International (LB&I) division and will be staffed with newly-hired employees focused on assessing the compliance of complex partnerships, large corporations and high-income individuals. The primary objective of this team is to counter non-compliance among wealthy filers who may have utilized pass-through entities to shield income and avoid tax payments.

These actions mark a significant shift in IRS’ enforcement priorities, aiming to hold wealthy taxpayers and large partnerships accountable for their tax obligations while addressing years of underfunding that have contributed to historically low audit rates for this demographic.

Anchin’s Tax Controversy group is comprised of former tax auditors with decades of collective experience, enabling us to provide rare insight on strategies to help minimize your exposure and resolve federal disputes efficiently. Our team’s unique perspective and strong track record in audit defense along with our credibility with the IRS help us manage issues and present you with the best possible advice.

For more information, updates and assistance related to the IRS’ enforcement efforts, please contact Alan Goldenberg, Principal and Leader of the State and Local Tax and Tax Controversy groups, or your Anchin Relationship Partner.