5 Key Takeaways from the IRS’ FY 2024 Financial Report

The Internal Revenue Service (IRS) recently released its 2024 Financial Report. While the 164-page report is long and dense, it provides some important insights for U.S. taxpayers heading into 2025. Here, New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, shares his five key takeaways.

Key Takeaway #1: The IRS Collected $98.7 Billion in Enforcement Revenue in FY 2024

According to the 2024 Financial Report, the IRS collected $98.7 billion in enforcement revenue during the previous fiscal year. As the IRS ramps up its enforcement efforts with additional funding under the Inflation Reduction Act, the agency’s leaders will almost certainly be looking to better this figure in 2025.

Key Takeaway #2: The IRS is Continuing to Target High-Income and High-Wealth Taxpayers

Targeting high-income and high-wealth taxpayers is one of the most efficient ways for the IRS to close the tax gap. As a result, it has prioritized high-income and high-wealth taxpayer enforcement in recent years, and it has made clear that this will continue to be the case in 2025 as well.

Key Takeaway #3: The IRS’ Pass-Through Enforcement Initiative is Already Well Underway

On October 22, 2024, the IRS announced the launch of a new enforcement initiative focused on pass-through entity compliance. However, the 2024 Financial Report makes clear that this initiative is already well underway. The IRS is currently in the process of auditing many of the largest pass-through taxpayers, and its new pass-through field operations unit will be targeting pass-through taxpayers “of every size and form” going forward.

Key Takeaway #4: Individual Taxpayers Can Expect to Face Scrutiny in a Variety of Areas

The IRS’s 2024 Financial Report states that the agency intends to “[p]ursue appropriate enforcement for complex, high-risk, and emerging issues” in 2025 and beyond. This means that individual taxpayers can expect to face scrutiny in a variety of areas, including (but not limited to):

• Cryptocurrency investing
• Other types of retail investing
• Gig (independent contractor) income
• Online gambling and gaming income
• Offshore account disclosures

Noncompliance in these areas (among others) can expose individual taxpayers to substantial liability. It can also expose individual taxpayers to criminal enforcement in some cases.

Key Takeaway #5: Technology is Playing a Major Role in the IRS’ Enforcement Efforts

The IRS’s 2024 Financial Report also makes clear that the agency is increasingly relying on artificial intelligence (AI) and other technologies to identify potential targets for audits and investigations. Not only does this mean that the IRS can conduct more inquiries because of its increased efficiency, but, since these technologies are far from perfect, it also means that taxpayers are more likely to face scrutiny that is unwarranted.

Request a Confidential Consultation with New Jersey Tax Lawyer Kevin E. Thorn

If you need to know more about the IRS’ efforts to enforce compliance in any of these (or any other) areas, we invite you to get in touch. To request a confidential consultation with New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 201-842-7696 or contact us online today.