IRS failed to collect more than $2.4B in taxes from the wealthy: watchdog

Correction: A previous version of this story misstated the amount the millionaires owed the IRS.

A Treasury Department watchdog report found that the IRS failed to collect over $2.4 billion in back taxes from those making more than $1 million a year.

“Taxpayers having an average AGI [adjusted gross income] of over $1.5 million paid the IRS an average of 39 percent of what they owe,” the report released last week states. “While 39 percent is more than what the IRS predicted it would collect, these high-income taxpayers still owed over $2 billion.”

The Treasury Inspector General for Tax Administration said the failure of the IRS to collect taxes due from the wealthy is because the agency doesn’t target a person’s income enough when deciding which cases to pursue.

The watchdog also noted that those with higher incomes have smaller amounts of taxes to pay.

There were at least 30 taxpayers who made over $50 million each with a total of $356,459 in taxes for the group. The report states 1,014 taxpayers making more than $5 million each owed less than $100,000 in taxes.

The report suggested going after those with higher incomes who owe smaller amounts because they would have the ability to pay. 

“The statement that these taxpayers paid the IRS an average of 39% of what they owe is not a complete presentation of the facts,” the IRS said in response in the report. “The 39% figure reflects only what was paid within the first year of the case being assigned to our Field Collection function.”

The IRS also rejected the assertion in the report that it does not focus on a person’s income, saying the agency “appropriately” takes a person’s income level into consideration when choosing which cases to pursue. 

“The inspector general’s report reiterates wealthy tax cheats are stealing billions from the American people,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said on Monday.

“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,” Wyden added. 

The Hill has reached out to the IRS for further comment. 

Updated: 02/03/2022, 5:15 p.m.