‘Many engaged in tax evasion’: A new IRS plan targets high-income Americans who haven’t done this 1 simple thing in recent years — here’s what you need to know
The IRS is cracking down on thousands of high-income Americans who haven’t filed their tax returns for several years — and have managed to dodge accountability until now.
The tax agency recently announced it would be sending 125,000 notices to thousands of people who make more than $400,000 annually and haven’t filed returns in at least one year since 2017.
Although the announcement didn’t clarify the exact amount of unpaid taxes, third-party information indicates financial activity of more than $100 billion.
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“At this time of year when millions of hard-working people are doing the right thing paying their taxes, we cannot tolerate those with higher incomes failing to do a basic civic duty of filing a tax return,” IRS commissioner Danny Werfel said in the press release.
“The IRS is taking this step to address this most basic form of non-compliance, which includes many who are engaged in tax evasion”.
Who’s going to receive compliance letters?
Although 125,000 notices will be sent out to wealthy Americans in the incoming weeks, the IRS noted the actual number of non-filers may be fewer than that, since many failed to file in multiple years.
About 25,000 cases involve non-filers who earn more than $1 million annually, while 100,000 instances stem from individuals who make between $400,000 to $1 million.
The tax agency added that while it’s uncertain what potential credits or deductions these non-filers may have, it believes they owe “hundreds of millions of dollars” in unpaid taxes.
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What penalties will non-filers face?
Between 20,000 to 40,000 letters will go out each week, starting with filers in the highest-income brackets, the IRS said. The “failure-to-file” penalty is typically 5% of the tax owed for each month a return is overdue, up to 25% of the bill.
The IRS advised these individuals to speak to a trusted tax professional and file immediately, or risk facing higher penalties and stronger enforcement measures, like collection and audit action and even potential criminal prosecution.
If the non-filer fails to respond or file, the IRS may file a substitute tax return on the person’s behalf and send a 90-day notice of deficiency. If the tax bill goes unpaid, the IRS can levy money from the person’s paycheck or bank account to collect the taxes owed.
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Werfel says this demonstrates importance of IRS funding
The IRS, which has been severely underfunded and understaffed for a decade, says this new effort to catch wealthy tax cheats was made possible by the recent infusion in funding through the Inflation Reduction Act.
“This is one of the clearest examples of the need to have a properly funded IRS,” Werfel said.
“With the Inflation Reduction Act resources, the agency finally has the funding to identify non-filers, ensure they meet this core civic responsibility, and ultimately help ensure fairness for everyone who plays by the rules.”
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.