US IRS Targets Collection on 125,000 Unfiled High-Income Tax Returns

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TL/DR –

The Internal Revenue Service (IRS) plans to target high-income earners who have not filed tax returns in 125,000 cases since 2017, thanks to the funding from the 2022 Inflation Reduction Act. The tax agency will resume sending non-filing notices to individuals, including 25,000 with an apparent annual income over $1 million, and another 100,000 with earnings between $400,000 and $1 million. IRS Commissioner Danny Werfel stated that the financial activity associated with these unfiled returns exceeds $100 billion, with unpaid tax liabilities potentially running into hundreds of millions of dollars.


IRS Crackdown on High-Income Tax Non-Filers

The Internal Revenue Service (IRS) vows to enforce tax compliance on high-income earners who haven’t filed tax returns in 125,000 cases since 2017. This revives the enforcement program previously impeded due to budget cuts.

According to the IRS, the 2022 Inflation Reduction Act granted $80 billion in funding over a decade, hiring sufficient staff to resume sending non-filing notices to these individuals. This includes high-income earners, with 25,000 reportedly earning over $1 million annually.

An additional 100,000 missing returns show income between $400,000 and $1 million. The IRS bases these findings on third-party data such as W-2 and 1099 income reports.

IRS Commissioner Danny Werfel reveals the financial activity linked with the unfiled returns exceeds $100 billion. The unpaid tax debts could potentially reach hundreds of millions of dollars. “With Inflation Reduction Act resources, the agency can pursue this core responsibility and ensure fairness for everyone who played by the rules,” Werfel said.

Werfel also mentions non-filers with apparent income less than $400,000 will receive notices. However, the agency will respect its commitment not to increase audit rates for this group. The focus will be helping them file their taxes and utilize tax breaks like the Child Tax Credit and the Earned Income Tax Credit for low-wage earners.

Impact of Budget Cuts on Non-Filer Enforcement Program

The enforcement program has been sporadic since 2016 due to staff reductions from over a decade of budget cuts passed by Republicans in Congress. The IRS needed adequate staff to pursue delinquent tax debt collections related to the notices.

Since the 2022 Inflation Reduction Act funding, the IRS hired up to 7,000 new customer service staff, account managers, collections staff, and implemented new automation technology. This move enables it to target high-income non-filers, mailing out 20,000 to 40,000 notices weekly.

As Republicans in Congress strive to claw back the $80 billion funding, the IRS shows tangible results through improved taxpayer phone support and nearly $500 million collections from 1,600 non-filing “millionaires”.

A report from the Congressional Budget Office indicates that rescinding $20 billion of the Inflation Reduction Act funds would diminish federal revenues by $44 billion over 10 years, adding $24 billion to the U.S. budget deficit.

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