US IRS to focus on tax compliance for complex pass-through entities

Thursday, 28 September 2023
The US Internal Revenue Service (IRS) will establish a special unit to focus on large or complex pass-through entities such as partnerships and S-corporations that do not pay corporate income tax.

The move is part of the IRS Large Business and International Division's initiative to focus more attention onto high-income compliance issues, as well as high-net-worth individuals. It will see the Division expanded through a new hiring initiative across the US to support the extended enforcement work of the agency.

Earlier in September 2023, the IRS announced the start of ‘a sweeping, historic effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation's tax laws’.

It notes that audit rates for certain taxpayer segments have dropped over the past decade. It therefore plans to use new technology, including artificial intelligence, to support IRS compliance teams in the detection of tax evasion and the identification of emerging compliance threats.

Broader IRS compliance work is planned for the next 12 months. It includes expanded work on digital assets, after an initial IRS review of digital currency exchange records identified a potential 75 per cent non-compliance rate. There will also be an increased scrutiny of foreign bank account reporting (FBAR) violations.


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