When the Inflation Reduction was passed back in 2022, a massive funding injection for the IRS was sold as giving them the resources to crack down on wealthy tax cheats. Increasingly absurd sums were floated as the potential return from throwing money at the IRS, with Sen. Elizabeth Warren (D-MA) outbidding everyone else by promising that $315 billion in new IRS funding could raise $1.75 trillion. As a recent NTUF analysis giving the IRS a “D” grade for its efforts in closing the tax gap points out, the IRS has so far returned just $1 billion of the $200 billion the Congressional Budget Office (CBO) had ultimately projected that increased IRS enforcement resources would recover.
But never fear! The IRS has finally caught a tax cheat in the act — and as an organization with more than $24 billion in income per year, it’s almost certainly the wealthiest one the IRS has uncovered tax malfeasance by yet. That organization is now required to pay $5.4 million after they failed to properly withhold federal taxes on behalf of employees and allowed employees to make contributions to deferred compensation plans that exceeded limits.
The only problem: that organization is the State of Maryland.
Any other taxpayer would be expected to pay penalties for such large-scale underreporting, but the IRS has agreed to waive penalties in this case because of how “novel” an audit of a state government is. Maryland may still owe interest on that amount, however.
Try using that excuse the next time you owe the IRS $5.4 million.