Ultra-wealthy's corporate jet is latest IRS crackdown

The IRS is bringing the hammer down on the ultra-wealthy's abuse of tax breaks on the use of corporate jets.

The agency will begin three to four dozen new audits this spring to parse through situations where inappropriate deductions were made and where personal travel by jet wasn't logged as income. While the cost of using a corporate aircraft is generally deductible for business purposes, some have blurred the lines between business and personal travel to get more in tax savings.

It will first focus on the "highest risk" corporations and complex partnerships in several industries, IRS Commissioner Danny Werfel said during a press call Wednesday, adding that the IRS would shift to audit individuals if needed.

corporate-jet.jpg
While it isn't uncommon for companies to use a corporate plane for personal reasons, it complicates eligibility for certain tax deductions.
Patrick T. Fallon/AFP via Getty Images

"We are concerned people are using business aircraft for personal use, and in turn, then taking the business deduction that they may not be fully entitled to," Werfel said. "Personal use of corporate jets and other aircraft by executives and others have personal and business tax implications and it's a complex area where IRS work had been stretched thin.

"We think there's a significant opportunity to collect a significant amount of revenue given the materiality of this activity," he said, without giving an exact amount.

While it isn't uncommon for company executives, partners and shareholders to use a corporate plane for personal reasons, it complicates eligibility for certain tax deductions.

The latest announcement follows months of IRS ramped-up efforts to curb wealthy individuals and companies that aren't paying what they owe. The agency is developing a database of corporate jet activity to help identify where it should audit. These enforcement efforts will be a part of a campaign in the Large Business and International Division, Werfel said.

"This is a complex area of tax law, and record-keeping can be challenging," he said.

Bloomberg News
Tax IRS Tax audits Tax deductions
MORE FROM ACCOUNTING TODAY