IRS to ramp up audits of private jet usage

The Internal Revenue Service said Wednesday it’s ramping up audits of corporate jets to collect more in unpaid taxes as part of its push to increase enforcement on wealthier taxpayers.

The tax collection agency will conduct three dozen to four dozen audits of companies and wealthy individuals who may be flying in corporate jets for leisure while noting their trips down as a business expense to reduce their taxes.

The audits will target aircraft used by large corporations, partnerships and wealthy taxpayers and probe whether they’ve been dishonestly designating business trips, IRS officials said Wednesday.

Executives and shareholders who use corporate jets and other assets for personal reasons need to report those instances as personal income to the IRS, the service’s Commissioner Danny Werfel told reporters.

The IRS will begin conducting these corporate jet audits this spring.

The new audits will be carried out under the authority of the section of the tax code pertaining to qualified business use, which has a special rule for aircraft, as well as two different sections of Treasury regulations, IRS large business division chief Holly Paz said.

The corporate jet audits are part of a larger IRS push to go after wealthy individuals and businesses who are allegedly skirting their tax bills, a key Biden administration priority enabled by an initial $80 billion funding boost provided in Democrats’ Inflation Reduction Act.

Republicans and Democrats agreed to scrap $20 billion of that funding during a deal to avert a default on the national debt last summer.

“Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to shelter or manipulate their income to avoid taxes,” the IRS said in a statement released Wednesday.

The IRS is going after partnerships and “pass-through entities,” which are various business designations that allow owners to report their business income on their personal tax returns.

More than $182 billion in individual business income that should have been paid to the government in 2021 went uncollected by the IRS, according to projections. The total tax gap for 2021 is projected to be $688 billion.