IRS Continues to Step Up its Enforcement Effort Related to High-Income Non-Filers

The IRS is continuing with its enforcement initiative targeting high earners by announcing a new effort focusing on taxpayers who have failed to file federal income tax returns in more than 125,000 instances since 2017. Notifications will be mailed to more than 25,000 people with incomes in excess of $1 million and over 100,000 people with incomes between $400,000 and $1,000,000. In all of these situations, the IRS has received third-party financial data, including W-2s and 1099s, indicating that these individuals received such income, yet they’ve failed to file a tax return.

Beginning this week, the IRS anticipates sending 20,000 to 40,000 compliance letters on a weekly basis, starting with those in the highest-income category. Many of these recipients have not filed for multiple tax years. People receiving these notices are urged to file their delinquent returns as soon as possible to avoid the continued accrual of interest and penalties.

Failing to respond to the letter and follow up notices will lead to additional IRS enforcement actions including audits, liens, levies and potential criminal prosecution. Further, the IRS will file a substitute return in lieu of an actual filing using the data on file with the agency. Note, this return will not provide credits and deductions the filer maybe entitled to, thereby significantly increasing the tax balance due which is also subject to interest and penalties.

If you have back-year unfiled taxes, the time to address the situation is now. We can help with your compliance requirements and seek opportunities to reduce your exposure. For more information, please contact Alan Goldenberg, Principal and Leader of the State and Local Tax and Tax Controversy groups, or your Anchin Relationship Partner.