IRS plans to raise $50 billion over 10 years, closing loophole exploited by the wealthy
The IRS estimates it will raise more than $50 billion over the next decade by closing a loophole often exploited by wealthy filers seeking to avoid paying taxes.
The loophole allows such taxpayers, as well as businesses, to move assets between entities in a way that authorities say has no economic purpose. Deputy Treasury Secretary Wally Adeyemo called the practice “really just a shell game" in a statement.
The use of such pass-through businesses has nevertheless increased 70% from 2010 to 2019, and helped allow the top 1% avoid paying $160 billion in taxes, Treasury said.
“Treasury and the IRS are focused on addressing high-end tax abuse from all angles, and the proposed rules released today will increase tax fairness and reduce the deficit,” U.S. Secretary of the Treasury Janet Yellen said in a statement.
The plan builds on ongoing IRS efforts to increase audits on the wealthiest taxpayers, large corporations and complex partnerships.
“These tax shelters allow wealthy taxpayers to avoid paying what they owe,” IRS Commissioner Danny Werfel told reporters on a press call Friday.
The announcement comes less than one week after President Joe Biden’s top economic advisor unveiled the administration's “key principles” for tax policy, including sustained IRS funding.
“We should ensure ultra-wealthy taxpayers pay what they owe and play by the same rules by maintaining the President’s investment in the IRS,” White House National Economic Council advisor Lael Brainard told reporters Wednesday.
IRS funding has been a target for Republicans and conservatives since Congress approved nearly $80 billion in funding via the Inflation Reduction Act.
The GOP has promised to reduce that funding, having already succeeded in clawing back $20 billion. House Speaker Mike Johnson has promised to strike at least another $10 billion for the 2025 budget.
Rob Wile is a breaking business news reporter for NBC News Digital.
Kate Dore, CFP, CNBC
Kate Dore is a Certified Financial Planner professional and a reporter on the Personal Finance team, covering tax planning.
Associated Press contributed.