Billionaires’ Secret Exposed: IRS Targets Luxury Jets in New Audit Blitz!

The Inflation Reduction Act was passed in 2022 and as a part of it, the IRS was given funds to implement more resources towards seeking out high-income individuals who are not paying their fair share in taxes. One of the ways the IRS is working towards this is by implementing more audits on millionaires and large corporations.

The IRS announced on Feb 21st that a new wave of audits will happen that will focus on the personal jet usage of high-income groups. Using business jets for personal use has tax implications, but the IRS has not had the resources in the past decade to examine this area allowing jet owners to get away without paying the taxes owed for improperly allocating between their personal and business jet usage.

Tax Implications of Using Business Jet for Personal Use

Some businesses end up purchasing jets that are used by officers, executives, and other business partners. They can write off the jets on their taxes as an asset if it is used for business purposes. Every trip they take for business can be written off on their taxes. However, it is not uncommon for business owners to also use these jets for personal use.

Business jets can and are often used for personal use, but when this happens, businesses must keep a record. Many people use the jet for personal use, yet illegally write it off as a business expense. It can also impact the income of the executive using it personally and therefore their taxes. Executives are required to write off a personal jet trip as private income.

How the IRS Plans to Target Jet Use

The IRS is implementing different “campaigns” to allocate resources towards high non-compliance tax areas. These campaigns focus on specific issues where examinations are necessary, such as the jet usage issue, as well as taxpayer outreach and education.

“Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin,” said Danny Werfel, IRS commissioner. “With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”

There are over 10,000 private jets owned by US companies. It is believed that these companies overstate their deductions and are therefore not paying their due taxes. This spring, a few dozen of them will be targeted through audits using advanced analytics. One way the IRS will be able to do this is by hiring more examiners, something they have not been able to do in the past. This is part of a larger effort to ensure those in the high-income bracket pay their taxes.

Why is Jet Usage Being Targeted Now?

Before the Inflation Reduction Act, there have been several budget cuts over the last decade that have prevented the IRS from ensuring the wealthy are paying their due taxes. Audit rates fell to an all-time low. In 2011, the audit rate for millionaires was 7.2%, dropping to 0.7% in 2019. The tax gap, which is how much money is owed in taxes versus how much money is paid every year, has grown substantially since then and is over $600 billion.

Once the Inflation Reduction Act was implemented, the IRS started to work aggressively towards reducing the tax gap. They did this by focusing specifically on millionaires who owed $250,000 or more in taxes. Through their efforts, they have already collected $482 million from 1,600 millionaires with plans to continue. Along with millionaires and business jet owners, the IRS is also pursuing multi-million-dollar partnership balance sheet discrepancies by performing more extensive audits using artificial intelligence.

Facing an Audit and Need a Dedicated Tax Attorney’s Help? We Have You Covered!

Audits can be a daunting experience, and having a dedicated tax attorney by your side is crucial for navigating the complexities of tax law. At Silver Law, our team of experienced tax attorneys is well-equipped to guide you through the audit process, ensuring your rights are protected and helping you present the strongest possible case.

Contact us today and let us help advocate for your interests and provide a comprehensive legal strategy!

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