On July 14, 2023, the IRS issued a release, IR-2023-126, discussing the agency’s improvements in taxpayer service and modernization efforts. From the compliance enforcement standpoint, the IRS announced that it will continue to focus on high income, high net worth taxpayers in its efforts to crack down on tax evasion and delinquent tax liabilities.  The IRS specifically addressed the following enforcement efforts: 

Collection of Delinquent Taxes from High Income Taxpayers. In the recent months, the IRS closed about 175 delinquent tax cases for millionaires, generating $38 million in tax payments. The IRS said it will continue to go after delinquent millionaires as they ramp up enforcement efforts. 

Pursuing Tax Evading Wealthy Taxpayers. In recent months, IRS Criminal Investigation Division has closed a lengthy list of cases where wealthy taxpayers have been sentenced for tax evasion, money laundering and filing false tax returns.  

 High-DollarSchemein Puerto Rico. The IRS identified about 100 high-income individuals claiming benefits in Puerto Rico without meeting the residence and source rules involving U.S. possessions.  Under the US tax law, bona fide residents of Puerto Rico are not subject to U.S. income taxes on income derived from sources within Puerto Rico; bona fide residents of Puerto Rico are only subject to U.S. income taxes on income derived from sources outside of Puerto Rico.  The IRS announced the crackdown on wealthy individuals who are attempting to avoid U.S. taxation on U.S. source income, by erroneously claiming Puerto Rico residence. Many of these cases will go to criminal investigation. 

 Pension Arrangements in Malta. Continuing with its efforts to crack down on unlawful offshore tactics, IRS and Treasury issued proposed rules in June that define Maltese personal retirement schemes used to avoid U.S. taxes as listed transactions. A listed transaction is a tax avoidance scheme that has been identified by the IRS and participants in listed transactions must file a disclosure statement with the IRS. Failure to file such a disclosure statement may result in significant penalties. 

 Cracking Down on Wealthy Non-Filers. The IRS continues to intensify its pursuit of wealthy individuals who do not file tax returns. The IRS will focus on the individuals who have high income, but fail to file their tax returns, with many cases being referred for criminal investigation. 

Holtz, Slavett & Drabkin, APLC is a tax controversy and tax litigation law firm consisting of former IRS attorneys.  We represent taxpayers in all aspects of tax disputes with the IRS and state tax authorities, including sensitive IRS audits, criminal investigations, and tax collection matters.  To schedule a consultation, please contact us at (310) 550-6200.