PHILADELPHIA, Nov. 1 (Reuters) – The U.S. government aims to generate $ 400 billion in new revenue over a decade by forcing wealthy Americans to re-comply with the Internal Revenue Service as part of the government’s lean social and climate spending plan. $ 1.75 billion from President Joe Biden.

The increased enforcement of the IRS to collect unpaid taxes is the biggest source of revenue for the legislation to be considered by Congress this week, and U.S. Assistant Secretary of the Treasury Wally Adeyemo told Reuters that a fear repeated audits among wealthy Americans would deter tax evasion.

While many of Biden’s initial investment priorities have been slashed or taken off the bill, plans to invest $ 80 billion in the IRS over a decade have survived. The approval would allow the hiring of thousands of new tax officers and the replacement of outdated IT systems in the years to come.

Hiring agents, updating systems and pursuing sophisticated audit cases will take time, Adeyemo told Reuters in an interview, adding that he believed the increased activity would spur them on. rich think twice before hiding income to avoid taxes.

“When you focus on audits and people see audits taking place – especially among people who are in the same situation – you have better compliance,” Adeyemo said during a visit to Philadelphia for promote increased child tax credit benefits from the bill.

“When they see more cops in the field looking at tax returns, what people will decide is better to pay than pay the fine at the end.”

After years of budget cuts and underinvestment, much of it under the control of Republican Congress, the IRS has 17,000 fewer revenue officers than a decade ago. The personal audit rate had fallen to 0.4% in fiscal 2019, half the rate of 0.8% in 2015 and well below the rate of 1.98% in 1977.

IRS Commissioner Charles Rettig, who was appointed by the Trump administration, told senators in April that the agency is “overwhelmed” by increasingly sophisticated tax evasion schemes that underestimate business income and capital gains, leaving a “tax gap” between taxes owed and collected of up to $ 1 trillion per year.

TARGETING TAX TRICKS

The Treasury previously had higher ambitions to use the IRS app to narrow the $ 700 billion tax gap over a decade, or about 10% of its estimated $ 7 trillion tax gap.

But that policy proposal was based on Congress’ approval of new requirements for banks to report account entries and exits as low as $ 600 per year to allow the IRS to find audit targets by doing so. match account activity with reported income.

The $ 600 threshold raised concerns from some lawmakers about financial confidentiality and the provision was removed from Biden’s revised spending plan last week.

Adeyemo said the IRS will always be able to use more sophisticated technology, including machine learning, to better target richer individuals as it invests in new systems and hires more agents. .

The proposed tax surtax of 5% on adjusted gross income above $ 10 million and 3% above $ 25 million could encourage high net worth individuals to hire more sophisticated tax lawyers, a- he said, but the IRS aims to meet this challenge.

“The question is how do you use the IRS resources to verify and validate and where it’s not possible to go out and ask questions. And we’ll have a lot more people who can ask those questions,” said Adeyemo.

Adeyemo called the $ 400 billion revenue target for IRS investments a “conservative” estimate, but said the agency will need to take stronger action to completely close the tax gap.

“We’re not going to be able to fill the gap with these resources, but we think we’re going to make a significant dent.”

Reporting by David Lawder; Editing by Heather Timmons and Daniel Wallis

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