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Thousands of millionaires haven't filed tax returns for years, IRS says – The Washington Post

Thousands of high-income earners have not filed tax returns in recent years, but the cash-strapped Internal Revenue Service has done nothing to force them to pay what they owe.

The situation has now changed, the tax authorities announced on Thursday. The IRS will send notices to thousands of people who earned more than $400,000 and failed to file returns for at least one year from 2017 to 2022, the first step in collecting unpaid taxes. .

IRS Commissioner Danny Wuerffel said about 25,000 cases involve people the agency knows have income of more than $1 million. Approximately 100,000 cases have occurred from people with incomes ranging from $400,000 to $1 million, according to their employers and banks reporting them to the IRS.

The IRS plans to send out 125,000 notices, but the actual number of taxpayers involved may be even lower because many taxpayers fail to file for multiple years.

If you don’t file within about two months of receiving the letter, the IRS will eventually file a “proxy” tax return on your behalf and take money from your paycheck or bank account to collect the unpaid taxes. Further measures can be taken, such as collection.

“People need to know that if they don’t file their taxes, there are consequences,” Werfel said.

Lawyers said failure to apply within a year could snowball. “They forget one year, and the next year they say, “If I apply now, I’m going to have a problem the year before.” Right off the bat, 15 or 20 years from now, they’re in trouble.” Much more. It’s a terrible problem,” said Rob Kovacev, a former Justice Department attorney. He said more than 15 years ago, before IRS budget cuts, his docket was full of unfiled cases, some of them for very wealthy people.

As Congress cut funding for the IRS over the past decade, the agency’s staff has declined and it has done little to strengthen tax compliance, including one of its most basic tasks: sending letters to people who didn’t file their tax returns. It is no longer done. Werfel said the “non-filer program” last operated in 2016, and since then there have only been sporadic attempts to contact non-filers.

He described the failure as “one of the clearest examples of the need to adequately fund the IRS.” In 2022, Congress granted the agency an additional $80 billion in aid over 10 years, but Congressional Republicans later took back $20 billion. The agency went on a hiring spree last year, giving the IRS enough staff to contact non-filers, process returns after they are filed, and pursue further action against non-filers. has been secured, Werfel said.

Werfel said the gain amounted to hundreds of millions of dollars in unpaid taxes on more than $100 billion in revenue.

Of the 125,000 missed returns, very few result in criminal tax evasion cases.

Thursday’s announcement reflects the Biden administration’s decision to focus its tax compliance efforts on high-income earners. The administration said it would not increase audit rates for taxpayers making less than $400,000 a year.

The IRS said it plans to eventually send letters to non-filers at all income levels. The letter to those with incomes under $400,000 focuses on the fact that they may not receive a refund. According to the IRS, more than 1 million households each year miss out on available deductions, such as the Earned Income Credit, by not filing a tax return.

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