The IRS has made it clear that it is doubling down on efforts to pursue individuals who fail to file tax returns, particularly high-income earners. This announcement comes as part of a broader strategy to increase compliance and close the tax gap, aligning with previous warnings about an uptick in audit rates.
Renewed Focus on Non-Filers and Wealthy Taxpayers
In a recent CNBC article, the IRS reiterated its commitment to cracking down on non-filers and ensuring that high-income individuals meet their tax obligations. In early 2024, the IRS mailed CP59 notices to 125,000 high-income individuals, urging them to file returns for missing tax years dating back to 2017. These notices focused on those earning over $400,000 annually. Since this effort began, the IRS reports that 26,000 taxpayers have complied, generating nearly $292 million in recovered taxes. However, the broader problem persists. The agency estimates that these non-filers collectively hold over $100 billion in unreported income.
What This Means for Taxpayers
The U.S. Treasury has proposed reclassifying chronic non-filing as a felony to increase deterrence. Under the proposal, taxpayers who fail to file returns for three out of five years, accruing unpaid taxes of at least $250,000, would face stiffer penalties, including potential imprisonment of up to five years.
The IRS’s intensified scrutiny creates significant risks for taxpayers, particularly those with complex financial profiles. High-income earners, business owners, and individuals with unfiled tax returns are likely to face increased attention from the agency.
How Sideman & Bancroft Can Help
The tax dispute lawyers at Sideman & Bancroft have extensive experience handling IRS audits and criminal investigations, as well as providing tax resolution services. The IRS’s renewed focus underscores the importance of proactive tax planning and expert representation. If you are concerned about how these enforcement efforts may affect you or your business, we encourage you to contact Sideman & Bancroft Tax Group leader Steve Katz or Jay Weill at: (415) 392-1960 email info@sideman.com.
Visit our Tax Practice page to learn more about how we can assist you in addressing IRS challenges.
