Unfiled Returns? IRS Warns 125,000 High-Earners to Comply or Face Penalties
The Internal Revenue Service (IRS) is intensifying its efforts against wealthy tax evaders, initiating a crackdown on over 125,000 high-income taxpayers who have failed to file returns since 2017.
This latest move by tax authorities aims to address cases collectively involving hundreds of millions of dollars in unpaid taxes, with more than 25,000 compliance letters directed at delinquent taxpayers earning over $1 million annually.
President Biden’s Investment in IRS Audits and Technology
The initiative represents the federal government’s ongoing campaign to increase tax audits of high-income individuals and businesses, bolstered by billions of dollars in new funding allocated by Congress.
President Joe Biden allocated nearly $80 billion in additional IRS funds through the Inflation Reduction Act of 2022, earmarked specifically for the collection of unpaid taxes from the wealthy, as well as for enhancing customer service and office technology within the agency.
However, congressional Republicans have expressed concerns about the allocation of these funds, alleging potential misuse to target ordinary taxpayers and small business owners. Nevertheless, the IRS has assured that audit rates will not rise for taxpayers earning less than $400,000 per year, approximately the top 2% of earners.
David Kass, executive director of Americans for Tax Fairness, commended the IRS’s enforcement efforts, emphasizing the importance of holding the wealthy accountable for their tax obligations. Kass remarked, “This IRS enforcement makes the point that the rich can’t play by their own set of rules.”
IRS Initiative Using Third-Party Data to Identify Non-Filers
The IRS’s latest initiative focuses on cases where third-party information, such as W-2 or 1099 forms, suggests significant income but no corresponding tax filings. Compliance letters, known as CP59 Notices, will be sent out starting this week to individuals in the highest income categories, urging immediate action to file returns or provide explanations for non-filing.
The total financial activity involved in these 125,000 cases exceeds $100 billion, according to the IRS. Despite this, some non-filers may actually be eligible for refunds. Taxpayers receiving compliance notices are urged to respond promptly to avoid harsh penalties and enforcement measures.
This latest crackdown is part of a series of new IRS initiatives targeting alleged tax evasion. In addition to pursuing high-income non-filers, the agency recently announced plans to audit private jets to examine their usage and associated tax deductions.
In summary, the IRS’s heightened enforcement actions signal a concerted effort to ensure tax compliance among high-income individuals and businesses, emphasizing the importance of fulfilling tax obligations and deterring tax evasion.
