The New IRS Enforcement Initiative

The IRS has significantly ramped up its efforts to identify and pursue high-net-worth individuals who have not filed their tax returns for multiple years. This initiative is part of a broader strategy to close the tax gap and ensure that all taxpayers pay their fair share, particularly those with substantial incomes.

The New IRS Enforcement Initiative

The IRS announced a new crackdown on high-income non-filers, focusing on those with significant financial activities who have failed to file federal income tax returns. Since 2017, there have been over 125,000 instances where high-income individuals, including millionaires, did not file their returns. This initiative is supported by resources from the Inflation Reduction Act, which has enabled the IRS to rejuvenate its non-filer program, previously hindered by budget and staffing constraints​ (IRS.gov)​​ (ThinkAdvisor)​.

Targeting Strategies

  1. High-Income Non-Filers: The IRS is prioritizing cases involving individuals with incomes exceeding $1 million and tax debts over $250,000. The agency has already collected significant amounts from these taxpayers, with more than $482 million recovered from 1,600 millionaires as of early 2024​ (IRS.gov)​​ (U.S. Department of the Treasury)​.

  2. Compliance Alerts: The IRS has begun sending compliance alert letters to non-filers. These letters serve as a prelude to more severe actions, such as audits and criminal prosecutions, if the recipients fail to come into compliance​ (Greenberg Firm)​.

  3. Enhanced Use of Technology: Utilizing artificial intelligence and advanced data analytics, the IRS is better equipped to identify discrepancies and non-compliance, particularly among large partnerships and corporations. This technology helps focus enforcement efforts on the most egregious cases of tax evasion​ (U.S. Department of the Treasury)​.

Legal and Financial Consequences

Non-filers face substantial penalties, including:

  • Failure-to-File Penalty: 5% per month, up to a maximum of 25%.
  • Failure-to-Pay Penalty: 0.5% per month, which combined with the failure-to-file penalty can reach a maximum of 47.5%.
  • Fraudulent Failure-to-File Penalty: This triples the normal failure-to-file penalty, raising the maximum to 75%​ (Greenberg Firm)​.

Moreover, the IRS can file Substitute for Returns (SFRs) using available information from third parties, which usually results in a higher tax liability for the non-filer due to the lack of favorable deductions and credits​ (Greenberg Firm)​.

Voluntary Compliance

Non-filers are encouraged to come forward voluntarily to mitigate penalties and avoid potential criminal charges. Engaging with a qualified tax attorney under attorney-client privilege can provide the best protection and guidance in navigating the complexities of becoming compliant​ (Greenberg Firm)​.

Conclusion

The IRS’s enhanced enforcement efforts underscore the importance of filing tax returns and paying due taxes. High-income non-filers are under increased scrutiny, and the agency is committed to using all available resources to ensure compliance. Individuals in this category should take proactive steps to address their non-filing status to avoid severe financial and legal consequences.

For further details, you can refer to the IRS official announcements and detailed reports on these enforcement actions on their website and the U.S. Department of the Treasury website​ (IRS.gov)​​ (IRS.gov)​​ (ThinkAdvisor)​​ (U.S. Department of the Treasury)​.

Contact Us

WK Tax Service helps individuals and businesses track their records for business and budgeting purposes as well as for tax purposes. Contact Mike Tavabi today to help get your financial house in order. We are happy to help simplify your life and help you be prepared to file your tax returns on time.

Contact: Mike Tavabi

Company: WK Tax Services

Phone: (310) 539-1068
Fax: (310) 988-2624
Email: mike@wkacctax.com