The Internal Revenue Service (IRS) is targeting tens of thousands of high earners in the US who haven’t filed tax returns in years in a major crackdown on tax evasion.
The IRS plans to send out about 125,000 notices to people who have earned more than $400,000 but did not file a tax return in one or more of the years from 2017 to 2022. Of that number, a fifth are reputed to involve people whose earnings topped $1 million, according to IRS commissioner, Danny Werfel.
The lost income in tax from these people could amount to hundreds of millions of dollars, Werfel added.
While 125,000 letters will be sent out, it is thought the actual number of people contacted will be less as some people will have not filed a return in more than one year.
Those who are contacted will have two months to file their missing return(s). If they fail to, the IRS has the power to take more action, including filing a ‘substitute’ return on their behalf and levying money from their bank account or paycheck to claw back the owed tax.
The IRS hasn’t been doing more to ensure people pay their taxes are its funding has been slashed in the past 10 years by Congress. In some cases, the IRS hasn’t even sent out letters to non-filers in recent years. Werfel admitted that a ‘non-filer program’ last operated in 2016, and only sporadic attempts have been made since to try and catch up with non-filers.
In 2022, Congress granted the IRS an extra $80 billion, spread over 10 years, although that was reduced to $60 billion after Republicans objected. But thanks to the additional financing, the IRS was able to hire more staff, enough to be able to pursue non-filers and take action against those who don’t put in their returns when asked – although it is thought that few of the missing returns will end up being charged with tax evasion.
