IRS implements new enforcement measures in bid to crack down on tax cheats

The IRS is getting serious about pursuing tax fraud among the wealthy, announcing a series of new enforcement actions in recent weeks targeting wealthy Americans who don’t pay their taxes.

The latest is a series of reminders aimed at high-income earners who simply refuse to fill out their tax returns, a group the IRS calls non-filers.

IRS Commissioner Danny Wuerffel said in a conference call Thursday that the IRS will send 25,000 letters to non-filers who make more than $1 million a year, and 100,000 letters to non-filers who make between $400,000 and $1 million a year. He said he plans to send a letter to the public.

The noncompliance notices, which the IRS calls CP59 notices, will be retroactive to 2017 for people who have not filed tax returns.

“The IRS knows who these non-filers are,” Werfel said. “The IRS has received third-party information, such as through Forms W2 and 1099s, that shows these people earned large amounts of income but did not file tax returns. We know that people exist and that very wealthy families are involved.”

The IRS believes the letter recipients have hundreds of millions of dollars in unpaid taxes, but Werfel did not provide a specific estimate. He also declined to reveal data on the effectiveness of CP59 notifications, but said they have a “very positive return on investment.”

According to various estimates, approximately 10 million people do not file tax returns each year, many of them on the lower income end.

But many corporate taxpayers also fail to file, accounting for a significant portion of the $688 billion in uncollected tax revenue each year and potentially increasing the national deficit.

The tax agency’s inspector general found problems with the way the IRS designates non-filers in 2017, resulting in 314,586 business taxpayers paying $335.5 billion in 1099-K income. Identified. Filer by IRS. ”

IRS enforcement has been on the decline in recent years. According to , audit rates declined across all tax brackets between 2010 and 2019. Government Accountability Office (GAO) But the steepest decline was among the wealthiest taxpayers.

Audit rates for people making more than $5 million a year have plummeted 86% over the past decade, from more than 16% of personal profits to less than 4%.

By comparison, interest rates for those earning between $25,000 and $200,000 per year fell by 76% over the same period, and interest rates for those earning less than $25,000 per year fell by 61%.

The IRS has said it has not tracked past filers due to staff shortages as agency resources dwindle, and the agency expects to receive about $60 billion in additional funding over the next nine years. We intend to counter this trend by investing in As a result of the Democratic Party’s Inflation Control Act.

“The IRS has had to roll back its core nonfiler compliance operations. Due to severe budget and staffing constraints, the IRS Nonfiler Program has only been implemented sporadically since 2015.” Werfel said Wednesday.

Non-filers may be subject to additional penalties and criminal prosecution if they fail to pay their taxes. You can also have a replacement tax return prepared from third-party data.

The drive against non-declarers follows a series of new audits announced on people who use corporate jets for personal purposes but fail to record their travel as income, a practice authorities hope to stamp out. This is another form of tax avoidance for the wealthy.

IRS officials announced last week that 30 to 40 audits of corporate jetliners will be conducted in the coming weeks.