IRS: Make Sure Your Bizjet Travel Is All Business

The IRS plans to launch “dozens” of audits of business aircraft use to ensure tax compliance by high-income filers, the agency announced this week. The agency will focus on whether large corporations, partnerships, and taxpayers are properly allocating between personal and business use for tax purposes.

Using funding received from the Inflation Reduction Act, the IRS plans to “closely examine this area, which has not been closely scrutinized during the past decade as agency resources fell sharply.” The agency further stated that the number of audits in this area could increase, depending on initial results and the hiring of additional examiners.

“Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin,” said IRS commissioner Danny Werfel. “With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”

Werfel’s aviation metaphors notwithstanding, National Business Aviation Association president and CEO Ed Bolen protested the approach, saying the announcement “amounts to nothing more than an audit in search of a problem, and an attempt to broadly paint with a negative brush the thousands of U.S. companies of all sizes that rely on business aircraft to effectively compete in a global marketplace.”

Bolen questioned why the agency would suggest that the companies, some of which are among the most respected and managed businesses globally, would be out of compliance: “For decades, studies have shown that companies utilizing business aircraft to successfully address some portion of their transportation challenges consistently outperform comparable companies without the asset.”

Acknowledging the complexity of business aircraft usage tax requirements, the IRS called the audit initiative part of its Large Business and International division’s “campaign” program. Campaigns are designed to address areas with a high risk of non-compliance, the agency explained. Efforts surrounding campaigns include taxpayer outreach and education, tax form changes, and addressing issues that lead to non-compliance.

Business aircraft usage is one of several areas where the agency is trying to address compliance in “complex, overlooked high-dollar areas.” The IRS noted, as an example, that it has already collected $482 million in taxes owed by 1,600 millionaires as part of this effort.