IRS Cracks Down on Unfiled High-Income Tax Returns

The Internal Revenue Service said on Thursday that it will reactivate a non-filer enforcement program that had been dormant for years due to previous budget cuts, and it will take tough measures against high-income earners who have failed to file tax returns in 125,000 cases since 2017.

The IRS stated that it has hired enough people to continue distributing non-filing letters and opens new tabs to these individuals, including 25,000 with apparent yearly incomes exceeding $1 million, thanks to the $80 billion in funds over a ten-year period provided by the 2022 Inflation Reduction Act.

A further 100,000 of the targeted missing returns showed income ranging from $400,000 to $1 million, according to documentation from third parties, such as W-2 and 1099 income reports.

According to IRS Commissioner Danny Werfel, unpaid tax obligations may easily reach the hundreds of millions of dollars, while the overall "financial activity" linked to the unfiled forms exceeds $100 billion.

"With Inflation Reduction Act resources, the agency finally has the funding to pursue this core responsibility and ensure fairness for everyone who played by the rules," Werfel stated.

Werfel stated that although the agency will honor its promise not to raise audit rates on this group, letters will thereafter be sent to non-filers with apparent incomes of less than $400,000. With this group, the focus will be on "helping them" file their taxes and benefit from any applicable tax advantages, such the Earned Income Tax Credit for low-wage earners and the Child Tax Credit.

Revitalizing IRS Enforcement: Budget Restorations and Impact

Since 2016, the non-filer enforcement program has only sometimes been in operation due to personnel cutbacks brought on by over ten years of budget cuts implemented by Republicans in Congress, according to Werfel. In order to pursue the collection of unpaid tax arrears associated with the notifications, the agency required an adequate number of employees.

Since the IRA money was granted in 2022, it has added up to 7,000 more employees to its customer care, account management, and collections departments. It has also installed new automated technologies to enable it to go after high-income individuals who have not filed. According to the organization, between 20,000 and 40,000 notifications will be mailed out each week.

As Republicans in Congress continue to try to reclaim the money, including a $20 billion cut as part of a top-line budget agreement, the IRS is keen to demonstrate that the additional $80 billion is having a noticeable impact. The new tab for fiscal 2024 opens. It reported that taxpayer phone wait times were decreasing as this year's tax filing season got underway, and it had just collected close to $500 million from 1,600 "millionaires" who did not file.

According to a recent analysis, opens new tab from the Congressional Budget Office, eliminating $20 billion in funding from the Inflation Reduction Act would result in a $44 billion drop in government receipts over a ten-year period, adding $24 billion to the deficit in the US budget during that time.