IRS moves to end another major tax loophole and raise $50 billion in the process as they zero in on one group of Americans - here is who they are targeting

The IRS has set its sights on what it says is $50 billion of missing tax revenue lost to wealthy people shifting their assets between companies.

The US Treasury announced new rules on Monday to crack down on 'partnership basis shifting' as they warned they were coming after $160 billion of due revenue they say is unpaid by the top 1 percent of earners each year.

Biden administration officials said after evaluating the practice that there are no economic grounds for these transactions, with Deputy Treasury Secretary Wally Adeyemo calling it 'really just a shell game'.

And they credited the additional IRS funding provided through the 2022 Inflation Reduction Act for enabling increased oversight and greater awareness of the practice.

'These tax shelters allow wealthy taxpayers to avoid paying what they owe,' IRS commissioner Danny Werfel said.

Taxpayers use the loophole by moving assets among a series of related parties.

Due to previous years of underfunding, the IRS had cut back on the auditing of wealthy individuals and the shifting of assets among partnerships and companies became common.

The IRS says filings for large pass-through businesses used for the type of tax avoidance in the guidance increased 70 percent from 174,100 in 2010 to 297,400 in 2019.

However, audit rates for these businesses fell from 3.8 percent to 0.1 percent in the same time frame.

Miles Johnson, a senior attorney adviser and partnership tax specialist at the Tax Law Center at NYU Law, said 'these transactions effectively make income disappear from the tax system by creating depreciation deductions or other tax reductions that don't reflect any true economic cost'.

He said the proposed rule and guidance shows that the IRS wants to stop these sorts of transactions 'by eliminating their tax benefits and better identifying them to the IRS as without substance'.

Monday's announcement is part of the IRS's ongoing effort to zero in on high-wealth tax evaders who manipulate the tax code or don't pay their taxes at all.

Initiatives announced in the past year have included pursuing people and businesses that improperly deduct personal flights on corporate jets and collecting back taxes from delinquent millionaires.

The IRS plans to raise audit rates on companies with assets above $250 million to 22.6 per cent in 2026, from an 8.8% rate in the tax year 2019.

It also plans to increase audit rates by tenfold on large complex partnerships with assets over $10 million.