IRS creates new unit to tax the rich

The IRS is establishing a new division focused on collecting taxes hidden within companies that transfer their tax obligations to shareholders.

These types of businesses, known as “pass-through” or “tax-transparent entities,” often take the legal form of limited liability partnerships, S-corporations, full partnerships, and sole proprietors.

The new division will be part of the IRS Large Business and International Division (LBI), responsible for collecting taxes from corporations, S-corporations, and partnerships with assets exceeding $10 million.

The establishment of this new division aims to “restore fairness in tax compliance by shifting greater attention to high-income individuals, partnerships, large corporations, and promoters who abuse the country’s tax laws.”

The IRS announced plans to hire 3,700 employees to focus on auditing “partnerships, large corporations, as well as high-income and high-net-worth individuals.”

According to IRS officials, the tax gap could reach $1 trillion—roughly 3% of the current $33 trillion national deficit.

The last time the tax gap was measured was for the tax years 2014-2016, consisting of $130 billion in uncollected individual income and $37 billion in uncollected corporate income tax.