Introduction:
The Internal Revenue Service (IRS) has announced a new initiative aimed at improving tax compliance by focusing on high-income individuals who have failed to file their federal income tax returns. This move, empowered by the Inflation Reduction Act’s funding, signifies a significant step towards ensuring fairness in the tax system.
New Enforcement Effort:
The IRS is set to distribute compliance letters to over 125,000 high-income taxpayers who have not filed their returns since 2017. This group includes more than 25,000 individuals with incomes exceeding $1 million and over 100,000 with incomes ranging between $400,000 and $1 million. The effort aims to rectify the gap in tax compliance through structured enforcement and outreach.
Background and Necessity:
For years, the IRS’s ability to monitor and enforce tax compliance was hindered by budget and staffing constraints. The Inflation Reduction Act’s provisions have now enabled the IRS to revive its non-filer program, targeting those who have skirted their civic responsibilities.
IRS Commissioner’s Stance:
IRS Commissioner Danny Werfel emphasized the importance of tax compliance, especially when the majority are fulfilling their obligations. He highlighted the initiative as a critical move to counter tax evasion and ensure fairness within the tax system.
Process and Implications:
The IRS will issue CP59 notices to prompt non-filers to take corrective action. Ignoring these notices can lead to:
- escalating enforcement
- additional penalties
- increased interest
- potential criminal prosecution
The IRS advises individuals to consult tax professionals and utilize available resources to resolve their filing status.
Broader Compliance Strategy:
This initiative is part of a larger strategy to enhance tax compliance among various groups, including large corporations and partnerships. Utilizing advanced tools like artificial intelligence, the IRS is expanding its audit and compliance capabilities to ensure that all entities pay their fair share.
Call to Action for Non-filers:
The IRS urges non-filers to address their tax responsibilities promptly to avoid further penalties and legal consequences. By engaging with the IRS and leveraging available resources, individuals can rectify their non-compliance and contribute to a fairer tax system.
Conclusion:
The IRS’s new initiative reflects a concerted effort to improve tax compliance and uphold the integrity of the tax system. High-income individuals who have neglected their filing duties are encouraged to take immediate action to comply with their tax obligations and avoid stringent enforcement measures.
