IRS Investment Update: Business Account Launches, Noncompliant US Subsidiaries Targeted

In a quarterly update on how the IRS has been utilizing Inflation Reduction Act (PL 117-169) resources, the agency announced the rollout of a new online feature and new initiatives aimed at high income and large corporate tax dodgers. (IR 2023-194; 10/20/23)

Previously in July, IRS Commissioner Danny Werfel estimated that an online tax account for businesses would first be available to sole proprietors by the end of fiscal year 2023. On October 19, Werfel told reporters that the IRS has been “making great progress with the launch,” the first phase of which was announced the following day in a release. Business tax account allows sole proprietors with an active Employer Identification Number to “check their tax payment history, make payments, view notices, authorize powers of attorney, and conduct other business.”

Also, as of the end of September, three forms can be submitted on a mobile device: Form 15109, Request for Tax Deferment; Form 14039, Identity Theft Affidavit; and Form 14242, Reporting Abusive Tax Promotions and/or Preparers. Form 14242, Reporting Abusive Tax Promotions and/or Preparers, will be added next “later this fall,” according to the release.

This past tax season was the first where taxpayers were able to respond to the 10 most common notices online. “As of September 29, the IRS received more than 32,000 responses to notices via the document upload tool,” said Werfel. “But this is not all. We also continue to expand the functionality of several online platforms for individual accounts. The IRS continues to deploy enhanced capabilities for individual accounts following the main launch of virtual assistants and live chat at the end of September.”

These additional highlights include new functionalities for Tax Pro Accounts. Now, practitioners can manage the active client authorizations on file with the Centralized Authorization File database, “which stores the information on individuals authorized to act on taxpayers behalf.” Additionally, users can view clients’ balance due amounts and other information, as well as withdraw from active authorizations “in real time,” Werfel explained.

Hiring customer service representatives to fill out new or existing understaffed Taxpayer Assistance Centers is still ongoing. Since July, the IRS has opened or reopened 11 TACs, brining the total to 50 going back to August 2022 when the Inflation Reduction Act was enacted.

“As of September 23, the IRS has hired 745 employees to staff [TACs],” per the agency.” This represents a 31% net increase in Taxpayer Assistance Center staffing compared to fiscal year 2022, and IRS continues to hire to replace departing staff. Taxpayer Assistance Centers have served about 235,000 more taxpayers in fiscal year 2023 than fiscal year 2022, an 18% increase.”

Since the enactment of the Inflation Reduction Act, the IRS has pledged to use the amounts marked for enforcement activities — the bulk of the $80 billion 10-year appropriation, to go after the sources of the highest amounts of uncollected tax revenue. During the span where the agency saw its annual funding dwindle beginning 2010, there was a shift towards quicker, easier collection efforts. Lower-income taxpayers, especially claimants of the earned income tax credit were impacted by this trend.

In the update, the IRS announced it is sending compliance alerts to roughly 150 U.S. subsidiaries of large foreign corporations accused of improperly using transfer pricing strategies to avoid taxation by not reporting U.S. profits. The Large Business & International Division is also adding new accountants early next year and will kick off 60 audits of “the largest corporate taxpayers” using artificial intelligence and subject matter experts. Other enforcement initiatives target noncompliance surrounding the Tax Cuts and Jobs Act of 2017’s repeal of the Code Sec. 199 domestic production activities deduction and individual millionaires with over $250,000 in recognized tax debt.

“We are already seeing results,” said Werfel on high-wealth individuals. “The IRS has collected $122 million in 100 of these already assigned 1,600 cases.”