International Taxpayers One Big Focus of New IRS Plan
After the IRS unveils its plans to spend billions in new funding, wealthy and international taxpayers can expect new attention from the agency in coming years.
The Internal Revenue Service has released its strategic operating plan for the next decade, the agency’s blueprint for how it plans to spend $80 billion in funding that was green lighted by last year’s passage of the Inflation Reduction Act.
More than $45 billion of the funding is slated for enforcement. The IRS will also be hiring tens of thousands of new employees, partially to make up for ongoing attrition and years of declining funding and staffing. The remainder of the funding will go toward IRS taxpayer services, operations support and business systems modernization.
The plan provides “a vision for the future” of U.S. tax administration, IRS Commissioner Daniel Werfel wrote in the introduction to the 150-page document, including “new capacities, including specialized skills, in place to unpack the complex filings of high-income taxpayers and large corporations and partnerships.”
This will address “a growing chasm between the number of experienced compliance personnel at the IRS who audit high-income, high-wealth tax filings for compliance (about 2,600 employees) and the roughly 30,000 individuals making more than $10 million a year, 60,000 large corporations and 300,000 large partnerships and S corps,” the agency said.
How the agency will heighten scrutiny of international taxpayers is still unclear, but the plan does promise to “enhance detection of noncompliance and increase enforcement activities for complex, high-risk, and novel emerging issues, including digital assets, listed transactions and certain international issues.”
“The IRS tracks many known, high-risk issues in noncompliance, such as digital asset transactions, listed transactions and certain international issues. These issues arise in multiple taxpayer segments, and data analysis shows a higher potential for noncompliance. Recent resource limitations have prevented the IRS from sufficiently examining these issues, while new issues that could significantly raise noncompliance and fraud schemes emerge each year, especially as new tax laws are enacted,” the plan reads.
The agency says that shortfalls limit its ability to address the tax gap – estimated at some $496 billion and expected to increase without significant investment – and outstanding tax revenue from such higher-risk segments as international activity. “Because of limited compliance coverage in areas such as complex partnership structures and certain international tax issues, the IRS has fewer data points to accurately estimate the true size of the tax gap in these segments. Global tax authorities are using innovative ways to focus enforcement on high-priority segments.”
The plan also mentions streamlined “connections among systems, services, and infrastructures” that process international and business tax balances and easier payment options with those with foreign bank accounts and foreign currency.
“For issues known to have high, ongoing risks of noncompliance or complexity, such as digital assets and listed transactions, we will prioritize resources to increase enforcement activities, including criminal investigation as appropriate. We will improve detection of emerging issues and gather feedback within the IRS to identify trends and risks,” the plan adds.
Werfel indicated that the IRS would regularly report on its progress to Congress and that more details, particularly on staffing and technology spending, would be forthcoming as the agency prepares to submit its budget to Congress. Clearly, international taxpayers can expect to be part of IRS developments as the new plan takes shape.
Your tax specialist needs to stay on top of this and many other developments concerning wealth, foreign income and tax enforcement. If we can help, please let us know.
About the Author
Alicea Castellanos is the CEO and Founder of Global Taxes LLC. Alicea provides personalized U.S. tax advisory and compliance services to high net worth families and their advisors. Alicea has more than 17 years of experience. Prior to forming Global Taxes, Alicea founded and oversaw operations at a boutique tax firm, worked at a prestigious global law firm and CPA firm. Alicea specializes in U.S. tax planning and compliance for non-U.S. families with global wealth and asset protection structures which include non-U.S. trusts, estates and foundations that have a U.S. connection.
Alicea also specializes in foreign investment in U.S. real estate property, and other U.S. assets, pre-immigration tax planning, U.S. expatriation matters, U.S. persons in receipt of foreign gifts and inheritances, foreign accounts and assets compliance, offshore voluntary disclosures/tax amnesties, FATCA registration, and foreign companies wanting to do business in the U.S. Alicea is fluent in Spanish and has a working knowledge of Portuguese.
Alicea is an active member of the Society of Trusts & Estates Practitioners (STEP), the New York State Society of Certified Public Accountants (NYSSCPAs), the American Institute of Certified Public Accountants (AICPA), the International Fiscal Association (IFA), a member of Clarkson Hyde Global, a world-wide association of accountants, auditors, tax specialists and business advisors and the Global Referral Network (GRN).
Distinctly, in 2020, Alicea was awarded with a prestigious NYSSCPA Forty Under 40 Award. She was selected as someone that has notable skills and is visibly making a difference in the accounting profession. Alicea has also been recognized as a leading expert for Tax advice and she has been invited to join Advisory Excellence, as their exclusively recommended tax expert in the USA.
In 2021 and 2022, Alicea was the Gold and Silver Winner, respectively, of Citywealth’s Powerwomen Awards in the category USA – Woman of the Year – Business Growth (Boutique). In 2023, she continued her winning streak by receiving the Gold award for Company of the Year Female Leadership (Boutique). Furthermore, Alicea is currently listed in the Global Elite Directory 2023, which is an annual exclusive directory of the world’s elite lawyers and outstanding wealth advisors advising ultra-high net-worth clients.
Please note: This content is intended for informational purposes only and is not a replacement for professional accounting or tax preparatory services. Consult your own accounting, tax, and legal professionals for advice related to your individual situation. Any copy or reproduction of our presentation is expressly prohibited. Any names or situations have been made up for illustrative purposes — any similarities found in real life are purely coincidental.