IRS Launches New Initiatives Using Inflation Reduction Act Funding to Ensure Large Corporations Pay Taxes Owed, Continues to Improve Service and Modernize Technology with Launch of Business Tax Account

On October 20, 2023, the U.S. Department of the Treasury published a press statement to inform that the Internal Revenue Service (IRS) has launched several initiatives to enhance tax collection from (foreign) companies and high net worth individuals and to improve services offered to the public (including businesses). The following text briefly describes those measures relevant for businesses; for information on measures affecting individual tax payers, please refer to the original press release.
#### Enforcement of tax collection
(1) Transfer pricing: The IRS is taking action to target U.S. subsidiaries of foreign companies that manipulate transfer pricing rules to report losses and avoid paying U.S. taxes on their profits. In fact, it is sending compliance alerts to these subsidiaries to remind them of their tax obligations and to „incentivize self-correction“.
(2) Additional audits of large corporations: The IRS‘ Large Business & International Division will perform additional audits on large (foreign) corporate taxpayers using data analytics and artificial intelligence to identify noncompliance. To select such firms, the IRS plans to use „a combination of artificial intelligence and subject matter expertise in areas such as cross-border issues and corporate planning and transactions“.
(3) Tax collection from high net worth individuals and high income earners: The IRS is increasing its focus on pursuing high-income and high-wealth individuals who have not filed their taxes or have unpaid tax debts. It is thereby concentrating on taxpayers with over $1 million in income and more than $250,000 in tax debt.
(4) Non-permissible tax break deductions: The IRS is cracking down on the abuse of a repealed corporate tax break that allowed deductions for producing goods in the U.S. After the 2017 repeal, many filers sought over $6 billion in refunds, with some claiming this deduction for the first time. The IRS initiated a campaign to address noncompliance and review high-risk claims.
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As far as improvement of tax services are concerned, there is one notably relevant for businesses: The IRS has launched the first phase of the Business Tax Account, a platform that will enable business taxpayers to manage their tax-related activities over time. In this initial phase, unincorporated sole proprietors with active Employer Identification Numbers can set up a business tax account to view their business profile and manage authorized users. Future enhancements will allow users to access letters and notices, request tax transcripts, grant power of attorney to third parties, schedule or cancel tax payments, and store bank account information through their business tax accounts.