Millionaires, beware! The Internal Revenue Service (IRS) is cracking down on non-filers and sending out a whopping 125,000 notices regarding unfiled tax returns. With estimates suggesting that these unpaid taxes could amount to hundreds of millions of dollars, high-income households need to take immediate action to avoid penalties and enforcement measures.
The IRS’s move comes as part of its ongoing efforts to improve compliance among high-income taxpayers. With funding from the Inflation Reduction Act of 2022, the agency is determined to ensure that all individuals, regardless of their income level, fulfill their tax obligations.
Of the 125,000 notices being sent out, over 100,000 are targeted at households with an income between $400,000 and $1 million, while more than 25,000 are bound for households with at least $1 million in income. These notices will address income tax returns that should have been filed in 2018. The IRS has identified these nonfilers through third-party forms that indicate significant income received but no corresponding tax return.
In fact, the third-party forms suggest a staggering $100 billion in financial activity that has gone unreported in tax returns. The IRS’s efforts to target nonfilers have been sporadic since 2016 due to staff and budget limitations. However, with the recent infusion of funding, the agency has hired between 5,000 and 7,000 new staff members for customer service, account management, and collections.
IRS Commissioner Danny Werfel emphasizes that nonfilers should not delay in taking action. Failure to do so could result in failure to file penalties, failure to pay penalties, and even enforcement measures like tax liens. The IRS provides an eight-week window for taxpayers to respond after receiving the notice.
This latest announcement is just one chapter in the IRS’s ongoing crackdown on tax evasion among high-income individuals and businesses. The agency has already focused on collecting unpaid back taxes from wealthy households, resulting in nearly $500 million in delinquent tax collections based on already filed returns.
Recently, the IRS also announced audits for several dozen companies and partnerships regarding write-offs claimed for company jets. This is in addition to a separate batch of audits for corporations and partnerships.
While failure to file tax returns can become a criminal offense in extreme cases, Commissioner Werfel assures taxpayers that the IRS works with them through multiple steps in the process before reaching a criminal outcome. However, in fiscal 2023, the IRS’s criminal-investigation division initiated 251 investigations into nonfiler cases, and those convicted faced an average prison sentence of 28 months.
In conclusion, nonfilers among high-income households should take note of the IRS’s warning. With millions of notices being sent out, it’s clear that the agency is determined to ensure compliance and collect the unpaid taxes that have gone unreported. Immediate action is necessary to avoid penalties, enforcement measures, and potential criminal charges. The time to file those long-overdue tax returns is now.
