International Consortium of Investigative Journalists, Inside the IRS Unit Taking on America’s Millionaires and Billionaires:

A pair of Internal Revenue Service agents are attempting to interview a billionaire they suspect of cheating on his taxes. But across the table from the agents is a formidable entourage of esteemed tax professionals hired to defend the billionaire. They include white-shoe attorneys — each of whom knows more about their own arcane corner of tax law than just about anyone on earth — along with highly specialized accountants and economists.

Neither of the two IRS agents has a law degree. Complex arguments from the billionaire’s entourage fly over their heads. The IRS agents are outmatched by a team whose combined years of experience in tax law and accounting exceed their own by over a century.

This stark example, laid out by former IRS officials in interviews with the International Consortium of Investigative Journalists, isn’t a hypothetical so much as a glimpse into the agency’s regular challenges in auditing the United States’ highest earners. These battles often come down to experience and expertise. The IRS has been losing, former officials said.

“The really experienced people tend to be on the outside [of the IRS],” Charles Rettig, who ran the IRS under former president Donald Trump and left the agency in 2022, told ICIJ. “That’s a major hurdle.”

A historic push is now underway to change this dynamic. In mid-2022, the Inflation Reduction Act delivered the IRS a historic $80 billion — in part, to bulk up the agency’s divisions that audit millionaires, billionaires and large corporations. After years of pitiful enforcement rates against wealthy taxpayers, the agency is embarking on an unprecedented push to step up its capabilities and hone its ability to take on the ultra-rich.

Hundreds of billions could be at stake. The Treasury Department, the IRS’s parent agency, has estimated that wealthy people do an outsized share of tax dodging. As of 2019, the top 1% of Americans are responsible for 28% of the “tax gap” — defined as the difference between taxes that are owed and collected. This number added up to an estimated $163 billion annually. In early February, the Treasury Department announced that if the increased funding levels remained intact, the IRS could collect more than a half-trillion dollars in additional unpaid taxes over the next decade.

ICIJ investigations, including the Panama Papers and Paradise Papers, revealed the complex maneuvers wealthy people and corporations use to evade or avoid taxes. Over several years of reporting, ProPublica exposed how chronic underfunding had put the IRS at a dire disadvantage, sometimes falling badly behind in complex global tax cases because it could not retain the necessary expertise to match its counterparts in the private sector.

For nearly two years, House Republicans have made it a priority to claw back the IRS’s new money, chipping away more than a quarter of the $80 billion. They have argued that an empowered tax agency will impinge on Americans’ liberties and have claimed, dubiously, that it will increase audits of working-class people. The IRS now finds itself in the difficult position of defending a mission that, due to its complexity and scale, could take years to yield its full impact.

Still, the agency has touted a few early wins spurred by the infusion of funds. It said it opened 1,600 new cases involving millionaires and billionaires last year and has already recouped several hundred million dollars in previously unpaid taxes as a result. This includes $15 million from one individual who claimed huge business deductions on the construction of their 51,000-square-foot mansion, including its pool, pool house, tennis and bocce ball courts, as well as luxury cars, country club memberships and homes for their children.

ICIJ spoke with more than a dozen current and former federal tax officials, as well as experts in the field, who painted a picture of an agency at a pivotal moment as it tries to modernize while coming under frequent political attacks. Equalling the might of the billionaire entourage is a goal that many agree is years away. Now may be its only chance to lay the groundwork.