IRS has recovered $1.3 billion in unpaid taxes from rich Americans

The IRS said Friday that it has recovered $1.3 billion in unpaid taxes from high-income Americans who had either failed to file their returns or who hadn't fully paid what they owed.

The announcement, made jointly with the U.S. Treasury Department, is aimed at highlighting the agency's ramped-up enforcement efforts against tax cheats, which have been funded under the 2022 Inflation Reduction Act.

That IRS funding has proved controversial, with some Republican lawmakers falsely claiming the money would be used to hire 87,000 new IRS agents to "to audit Walmart shoppers."

Instead, the IRS says the money is being invested in improved customer service following years of snarls during the pandemic, as well as to increase the number of audits on people with more than $1 million in annual income and more than $250,000 in tax debts.

125,000 high earners haven't paid taxes in years

The initiative is designed "to crack down on tax evasion so that high earners pay what they owe," Treasury Secretary Janet Yellen said in prepared remarks released ahead of a scheduled speech in Austin, Texas, on Friday. "For too long, this hadn't been happening. Between 2010 and 2018, the audit rate for millionaires fell by 80%."

She added, "And during the previous administration, as audit rates on high-income taxpayers fell, the share of audits on taxpayers with incomes under $200,000 increased. In 2019, the top 1% of Americans was estimated to owe over one-fifth of unpaid taxes, leaving ordinary Americans to shoulder the burden."

Yellen said the IRS is pursuing 125,000 wealthy taxpayers who haven't filed taxes in years. With stronger enforcement, about 21,000 of those taxpayers have filed their returns over the last six months, paying $172 million in taxes, she added.

Those 21,000 taxpayers who have filed their taxes were the first to respond after the IRS reached out to alert them that they needed to file, according to a senior Treasury official who spoke on a conference call with reporters. The IRS is likely to recoup hundreds of millions more in new tax revenue from the remaining 104,000 people who still need to file, he said.

The agency is ready to use its enforcement authority to go after the remaining individuals who haven't yet filed, the official noted.

Since the crackdown roughly 80% of 1,600 millionaires with overdue taxes have paid up, providing an additional $1.1 billion in taxes, the Treasury said. That represents an increase of $100 million since July, when the IRS noted it had recovered $1 billion from this group of taxpayers .