In a sign of its beefed-up investigative and collection powers, the Internal Revenue Service levied an unprecedented $7 billion in tax penalties in 2023.
For those studying the IRS’ tax penalty numbers, that figure seems large. But its significance, according to various sources, is particularly noted when compared with the only $1.8 billion the agency assessed in 2022.
According to a comprehensive report just published by the Wall Street Journal, the fines particularly hit business owners who underpaid their estimated quarterly income taxes, as well as investors, retirees, and gig workers.
The newspaper also noted that the average estimated tax penalty in 2023 was up to $500 compared with around $150 the year before.
The increase in penalties comes after the agency received some $80 billion in new federal funding in 2022 via the Inflation Reduction Act. According to the Federal News Network, that additional funding allowed the IRS to hire more than 3,700 additional agents last year.
The new funding and expanded IRS payroll, the White House has since declared, was designed to “close the tax gap by specifically enforcing compliance by the wealthiest tax evaders.”
In speaking last fall to the publication Forbes, Danny Werful, IRS Commissioner, noted that the agency had identified some 1,600 millionaires who owed at least $250,000 in back taxes. He added that the years previous to passage of the Inflation Reduction Act saw “the lowest audit rate of wealthy filers in our history.”
The stepped-up IRS enforcement, says the Wall Street Journal, should serve as a “wake up call for millions of Americans who pay some or all of their income taxes quarterly rather than through paycheck withholding.”
The deadline for the most recent quarterly payment is June 17, which the agency says taxpayers must respond to in order to “avoid falling behind on their taxes and facing possible underpayment penalties.”
By Garry Boulard
Image Credit: Courtesy of Pixabay
