Using Inflation Reduction Act funding and as part of ongoing efforts to improve tax compliance in high-income categories, the IRS announced plans to begin dozens of audits on business aircraft involving personal use by executives, partners, shareholders, and others for tax purposes. According to the IRS, the level of personal use impacts eligibility for certain business deductions. Use of a company jet generally results in taxable income by the individual using the jet for personal travel and could also impact the business’s eligibility to deduct costs related to the personal travel.
The examination of corporate jet usage is part of the IRS Large Business and International division’s “campaign” program. Campaigns apply different compliance streams to help address areas with a high risk of non-compliance. These efforts include issue-focused examinations, taxpayer outreach and education, tax form changes and focusing on particular issues that present a high risk of noncompliance.
In addition to working on corporate jets, the IRS has a variety of efforts underway to improve tax compliance in complex, overlooked high-dollar areas where the agency did not have adequate resources prior to Inflation Reduction Act funding.
For example, the IRS is continuing to pursue millionaires that have not paid hundreds of millions of dollars in tax debt. The IRS has already collected $482 million in ongoing efforts to recoup taxes owed by 1,600 millionaires with action continuing in this area. Elsewhere, the IRS is pursuing multi-million-dollar partnership balance sheet discrepancies, ramping up audits of more than 75 of the largest partnerships using artificial intelligence (AI) as well as other areas.
The IRS will begin conducting examinations in the near future as part of the agency’s commitment to ensuring fairness in tax administration.