Tax audits

More than 20 percent of the wealthiest Americans’ income isn’t being reported to the Internal Revenue Service, according to a new study that calculates U.S. tax evasion is far higher than previously estimated.

Fewer than two out of every 100 taxpayers reporting over $1 million in income were audited by the Internal Revenue Service in fiscal year 2020, according to a new report.

Auditors were only able to recoup about 39 percent of the more than $4 billion in unpaid taxes owed by a group of rich taxpayers with an average annual income of nearly $1.6 million.

Senator Elizabeth Warren said IRS funding should be bolstered so the richest Americans get audited about once every three years as part of her proposed 2 percent annual tax on wealth in excess of $50 million.

House Democrats are proposing two pieces of legislation that would also provide more funding for the Internal Revenue Service.

Claims for the R&D tax credit may be coming under closer scrutiny from the IRS.

The Internal Revenue Service hasn’t been pursuing cases involving hundreds of billions of dollars in income from individuals and businesses whose income has been showing up in Form 1099-K information returns, but has been otherwise unreported.

The enforcement push comes after years of persistently low examination rates.

But the IRS would need more resources, writes Natasha Sarin, an assistant professor of law at UPenn.

Practitioners share their expectations around the potential for more action from tax authorities.