Daily Management Review

US millionaires owe $2.4bn in income tax


The US Internal Revenue Service (IRS) is not effectively collecting taxes from wealthy Americans. Taxpayers with incomes over $1.5m a year have failed to pay 39% of their income tax arrears and owe the treasury $2.4bn, CNBC reported, citing a report from the Treasury Inspector General for Tax Administration.

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The IRS needs to be more vigorous in keeping tabs on wealthy Americans who deliberately evade paying income tax, the inspector general's report said. 

Some 686,000 taxpayers earning at least $200,000 a year had a combined $38.5 billion in tax arrears as of mid-May 2019, according to the audit. The report notes that the IRS collects less than 50% of tax arrears from high-income taxpayers within a year of referral to the IRS. For example, Americans earning $1.5m or more a year owed 39% of the $2.4bn in unpaid taxes.

"Non-compliance by high-income taxpayers could have a significant devastating impact on overall tax administration, as well as reinforcing the belief that the nation's tax system favours the rich," the inspector general's report said. 

It also said that the IRS may be ineffective in tackling overdue tax arrears due to a lack of experienced tax collectors on the tax department's payroll. The IRS does not make taxpayer income the top priority in determining which cases tax collectors should work on, the inspector general notes. 

The report points out that the IRS places greater weight on other factors, such as the amount of tax debts owed. Tax debts are not always an accurate identifier of the wealthy, the report says. For example, the highest number of high-income taxpayers (69%) owed less than $25,000. "It is reasonable to assume that taxpayers earning millions of dollars can pay tax debts that are a very small fraction of that amount," the report said.

source: cnbc.com