February 6, 2024
The IRS will audit private jet owners for impermissible deductions and could expand the audits based on initial results.
The Internal Revenue Service is targeting private jet owners as part of its “ongoing efforts to improve tax compliance in high-income categories.”
NBAA President and CEO Ed Bolen said the move “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.”
He added, “It is difficult to understand why the agency is suggesting that these companies — some of the most respected, well-managed businesses in the world — are not in compliance with applicable tax laws.”
Vedder Price aviation attorney David Hernandez noted, “The IRS is targeting impermissible deductions related to personal use.”
Last week, the IRS said it “plans to begin dozens of audits on business aircraft involving personal use.”
In a release, the national tax collector said, “The audits will be focused on aircraft usage by large corporations, large partnerships, and high-income taxpayers and whether for tax purposes the use of jets is being properly allocated between business and personal reasons.”
IRS Commissioner Danny Werfel said, “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. 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 said the delineation between business and personal usage had escaped scrutiny in the past decade due to a lack of resources.
Based on initial findings, “the number of audits related to aircraft usage could increase in the future.”
The IRS noted, “The use of a company aircraft must be allocated between business use and personal use. This is a complex area of tax law, and record-keeping can be challenging.”
It continued, “For someone such as an executive using the company jet for personal travel, the amount of personal usage impacts eligibility for certain business deductions. Use of the company jet for personal travel typically results in income inclusion by the individual using the jet for personal travel and could also impact the business’s eligibility to deduct costs related to the personal travel.”
The IRS says it collected $482 million in ongoing efforts to recoup taxes owed by 1,600 millionaires, with action continuing in this area.
READ: Empty private jet seats, taxable benefits, and the IRS: Weisselberg lessons
