The IRS has signaled a comprehensive and stringent measure against tax non-compliance by the affluent. Its latest campaign zeros in on individuals with significant earnings who have eluded their tax obligations. This week, tax compliance letters are slated for distribution to over 125,000 high-income earners.
Who is Affected by the IRS Notice?
Internal Revenue Service (IRS) has set its sights on a particular group of people: those with overflowing wallets yet a shortage in civic responsibility in tax filing. This initiative affects over 25,000 individuals. These individuals have incomes above $1 million. The initiative also covers a larger group of 100,000 taxpayers. Their incomes span from $400,000 to $1 million. The goal is to target those who haven't filed tax returns since 2017.
Affording such an extensive undertaking became feasible with the Inflation Reduction Act's funds, invigorating the IRS with the needed resources to execute its duty of tax administration.
Why is the IRS Taking Action?
Underpinning this endeavor is a quest for fairness in taxation, notably from IRS Commissioner Danny Werfel. Werfel's message is stark: while countless Americans adhere to their tax responsibilities, high-income individuals should not bypass their own. The new influx of funds bestowed by the Inflation Reduction Act propels the IRS to challenge this fundamental non-compliance more resolutely.
A shortage once hindered this persistent issue of unpaid taxes by those in the upper-income echelon resources. However, bolstered by the Inflation Reduction Act, the IRS is now equipped to tackle these cases.
What Should Non-Filers Do?
Recipients of a CP59 notice, or compliance alert, are nudged to take prompt action to stave off more severe consequences and escalating penalties. The IRS cautions that the failure-to-file penalty can intensify to 5% of the monthly owed, capping out at 25%. Assistance for non-filers is available on the IRS website, and consulting with tax professionals is highly advised to rectify overdue returns promptly.
IRS Collections and Actions for Persistent Non-Filers
The IRS's actions will amplify should these high-earners continue to neglect their tax filing responsibilities. Those disregarding the non-filer letter will receive additional notices leading to consequential enforcement maneuvers. Non-compliance could culminate in audit procedures, intensive collection actions, or criminal indictments.
In scenarios where communication remains unanswered, and tax returns are still missing, the IRS will implement a Substitute for Return (SFR). This substitute tax return is computed based on information from employers and financial entities. Nevertheless, it may not accredit the taxpayer with potential deductions for which they are eligible, only emphasizing the importance of filing their return.
Prepared to Fend Off Tax Evasion
Not confined to individual taxpayers, the IRS's efforts stretch to high-value partnerships and corporations, fortifying tax compliance. Earlier budget cuts constrained the agency, particularly in its challenge against tax avoidance schemes used by the wealthiest. The IRS has persevered in recapturing nearly $500 million from millionaires evading tax payments, with the action continuing.
With artificial intelligence (AI) and other advanced technologies, the department intensifies audits and scrutinizes balance discrepancies in large partnerships, poised to reduce tax evasion and non-compliance.
