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IRS Launches New Effort at High Income Non-Filers: Impacted Taxpayers Should Seek Representation

By Jeffrey M. Glassman on February 29, 2024
On February 29, 2024, the IRS announced a new effort to target high-income individuals. This time the IRS announced that they have opened 125,000 cases focusing on millionaires who have failed to file income tax returns. The IRS believes that, based on third-party information received, there may be more than $100 billion of unreported financial activity and conservatively hundreds of millions of dollars of unpaid tax.

The IRS attributes the Inflation Reduction Act funding for making these efforts possible. The IRS said that compliance letters have gone out this week “on more than 125,000 cases where tax returns haven’t been filed since 2017. The mailings include more than 25,000 to those with more than $1 million in income, and over 100,000 to people with incomes between $400,000 and $1 million between tax years 2017 and 2021.”

The IRS also stated the following about their other efforts to improve tax compliance with their new funding:

The new non-filer initiative is part of a larger effort underway with the IRS working to ensure large corporate, large partnership and high-income individual filers pay the taxes they owe. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to shelter or manipulate their income to avoid taxes. The IRS is now taking swift and aggressive action to close this gap.

The IRS has a variety of efforts underway to improve tax compliance in overlooked areas where the agency did not have adequate resources prior to Inflation Reduction Act funding.

For example, the IRS is continuing to pursue millionaires that have not paid hundreds of millions of dollars in tax debt. The IRS has collected nearly $500 million in ongoing efforts to recoup taxes owed by 1,600 millionaires with work continuing in this area. In other areas, the IRS is pursuing multi-million-dollar partnership balance sheet discrepancies, ramping up audits of more than 75 of the largest partnerships using artificial intelligence (AI) as well as other areas.
 
If a taxpayer is part of this IRS initiative, the taxpayer is likely to receive a Notice C-59, which instructs taxpayers to file their tax returns and fill out Form 15103 (link), to explain (1) why you are filing late; (2) why you don’t have to file; or (3) that you have already filed.

The IRS is threatening severe consequences if people do not take action in response to these notices. One of these consequences mentioned by the IRS is potentially criminal prosecution.

Taxpayers who receive a non-filer letter must take these letters seriously and take immediate action. Any action (or inaction) to the contrary may carry stiff repercussions. It is strongly advisable to seek professional representation if you are an impacted taxpayer.

The full IRS notice can be found through this link.

If you have any questions about this article or any other criminal or civil tax matter, please contact me at jglassman@meadowscollier.com or 214-749-2417.