IRS Launches Sweeping Audits on Business Jet Usage to Enhance Tax Compliance
In a recent announcement, the Internal Revenue Service (IRS) revealed plans to initiate extensive audits on business aircraft usage, focusing on personal use by large corporations, partnerships, and high-income taxpayers. This move is part of the IRS's broader efforts to improve tax compliance in high-income categories, utilizing funding from the Inflation Reduction Act.
The audits will scrutinize whether the use of jets is accurately allocated between business and personal purposes for tax considerations. Large corporations often use business aircraft for both business and personal reasons by executives, employees, shareholders, and partners. The complexity of tax law in this area, coupled with challenging record-keeping, has led the IRS to deploy advanced analytics and resources to closely examine these cases.
The examination of corporate jet usage falls under the IRS Large Business and International division’s "campaign" program, which aims to address high-risk areas of non-compliance. This involves issue-focused examinations, taxpayer outreach, education, tax form changes, and a specific focus on areas with a high risk of noncompliance.
The IRS, boosted by the Inflation Reduction Act funding, is also targeting other areas of tax compliance. This includes efforts to collect taxes owed by millionaires, with $482 million already collected from 1,600 millionaires. The agency is ramping up audits of large partnerships using artificial intelligence and addressing multi-million-dollar partnership balance sheet discrepancies.
IRS Commissioner Danny Werfel highlighted the IRS's commitment to increasing scrutiny on high-income taxpayers, aiming to reverse historically low audit rates faced by the wealthiest individuals and organizations. The agency is investing in additional staff and technology to ensure compliance with federal tax laws, with more announcements expected in this crucial area.
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