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.
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