IRS turns to rich people who don’t file to get more tax dollars – Chicago Tribune

The IRS said it expects to receive hundreds of millions of dollars from high-income individuals who did not file federal income tax returns, in a new initiative in the agency’s fight to recover money owed from wealthy taxpayers.

The agency is using the letters to target 125,000 taxpayers with incomes of more than $400,000 who did not file returns between 2017 and 2021, according to Thursday’s announcement. Letters will be sent this week to those who haven’t filed.

The IRS called the expected hundreds of millions of dollars a “conservative estimate.” According to the agency, the targeted taxpayers’ economic activity exceeds $100 billion.

The IRS generally focuses on closing the tax gap, or the gap between what is owed and what is paid, by targeting high-net-worth individuals. Democrats’ tax and climate legislation provided tens of billions of dollars in funding for the agency, allowing for increased enforcement efforts. Large partnerships and corporate jet users are other areas where the IRS is looking to recoup money owed.

The revenue from approximately 25,000 unfiled cases targeted in this campaign is over $1 million. The IRS has W-2 and 1099 forms from third parties that identify these high-income, non-filers. The IRS said about 20,000 to 40,000 letters will be sent each week, starting with top earners.

Individuals who fail to comply with the IRS’s initial CP-59 notices will receive follow-up notices and higher penalties in addition to owing interest. For people who continue to fail to file, the IRS may offer a substitute return based on income and does not include deductions or exemptions that they do not know about. Criminal prosecution is also a possibility for continued noncompliance.

IRS Commissioner Danny Werfel said during a press call that the agency must restructure its capacity to launch compliance efforts for non-filers after the pandemic. The IRS resumed automatic collection notices at the end of last year after a nearly two-year hiatus due to a backlog of transactions and staff shortages.

Werfel said the agency now has more than 5,000 new customer service and account managers hired through the 2022 fund.

The difference between this non-filing effort and those in the past is the emphasis on high-income people, Werfel said. For people with incomes under $400,000, the IRS focuses more on helping them file refunds because they are more likely to get a refund, he said.

“We will use all sanctions dollars enacted under the Inflation Reduction Act to increase scrutiny on those earning more than $400,000,” Werfel said.