First, there was one that tracked the private jet usage of Taylor Swift and other celebrities. Going forward, there will be even more scrutiny on executives' personal use of business aircraft, which is recorded as an expense in taxes.
IRS leadership announced Wednesday that as part of the agency's continued mission to pursue high-value tax fraud, the agency will investigate companies' private jets and how they are used personally by executives and written off as tax deductions. announced that it would launch dozens of audits to determine whether the Abusing the tax system at the expense of American taxpayers.
The IRS said the audit will focus on aircraft used by large corporations and high-income taxpayers and whether the tax purposes of using the jets are properly allocated.
“At a time when millions of hard-working taxpayers are paying their taxes, we want you to have confidence that everyone is following the same rules,” IRS Commissioner Daniel Werfel said in a preview of the announcement. He spoke on the phone with reporters. Tax season began on January 29th.
“These aircraft audits will help ensure that high-income groups are not acting in disregard of their tax obligations,” he said.
According to the IRS, there are more than 10,000 corporate jets in the United States with a value in the tens of millions of dollars, many of which are fully deductible.
The Tax Cuts and Jobs Act, passed during the Trump administration, allows 100% bonus depreciation and expense treatment for private jets, allowing taxpayers to pay for the cost of aircraft purchased and put into service between September 2017 and January 2023. It was approved to be written off.
Werfel said federal tax collectors will use funding from Democrats' anti-inflation law to take a closer look at the use of private jets. The use of private jets has not been under scrutiny for the past decade as funding has declined sharply over the past decade.
“Our audit rate is poor,” he said on a conference call. An April 2023 IRS report on tax audit data stated that “ongoing resource constraints limit the agency's ability to address costly noncompliance” and that for the 2018 tax year, It is stated that the tax audit rate for income earners of $10 million or more has decreased from 13.6% to 9.2%. And over the same period, the overall corporate audit rate fell from 1.3% to 0.6%.
Mike Kercher, senior legal adviser at New York University's Tax Law Center, said in a statement that the IRS needs to reconsider not only how flights are reported, but also how it evaluates personal use of corporate aircraft.
“Current rules allow for significant undervaluation of these tickets, allowing wealthy filers to pay much lower taxes than their fair market value would indicate. It is within the IRS's authority to amend it,” Karcher said.
Werfel said there could be more audits related to aircraft use in the future, depending on the results of initial audits and as the IRS continues to hire inspectors.
“To be clear, not all partnerships and companies in the high income category avoid tax obligations,” Werfel said. “But that means the IRS has more work to do to make sure people pay what they're owed.”
