In 2023, IRS penalties rose significantly to $7 billion, compared to $1.8 billion in 2022, as a result of increased staffing.
Surge to $7 Billion in 2023 Spurs Concern
The IRS levied a record $7 billion in tax penalties last year, up from $1.8 billion in 2022, after the Biden administration increased IRS staffing. Business owners, gig workers, and investors were most affected. Average penalties rose to $500 from $150 due to higher interest rates, which climbed from 3% in 2021 to 8% in late 2023. This emphasizes the importance of accurately paying taxes to avoid large penalties.
Self-employed individuals pay taxes quarterly. The Inflation Reduction Act gave the IRS $80 billion for more enforcement and hires potentially raising $561 billion in tax revenues by 2034. However, House Republicans cut IRS funding by $1.4 billion and redirected $20 billion to non-defense programs over the next two years, according to the report of New York Post.
(photo: Wall Street Journal)
Timely Tax Compliance Crucial Amid Funding Challenges
Despite efforts to reduce its funding, the IRS is determined to enforce tax laws and collect overdue taxes. A Treasury Department study suggests the IRS could recover much more unpaid taxes than expected. Timely tax compliance is crucial to avoid penalties and interest charges.
