If you earn upwards of $100,000 or more each year and did not file one or more tax returns with the Internal Revenue Service (IRS), this blog is for you.
In 2021, a report by the Treasury Inspector General for Tax Administration (TIGTA) identified some interesting statistics. Approximately 685,555 taxpayers had a balance due in May of 2021. Of those, the taxpayers who reported a gross income of $200,000 owed a combined $38.5 billion in taxes. While it would be logical that those with higher incomes could be natural targets for an IRS civil audit, the report found that the system for collecting taxes from these individuals was not as efficient as it could be. An additional report found that the IRS collected less than 50 percent of the tax debt owed by these taxpayers within 52 weeks of assignment for collection.
In 2020, the IRS had already announced initiatives to boost collection from high-income non-filers. Some of the tools identified by the IRS to enhance those efforts include:
- Delinquent Return Refund Hold Program: This program allows the IRS to hold individual tax refunds from a current or prior year if the taxpayer has not filed one or more tax returns in the previous five years.
- Priority of review and collection for high-income individuals and businesses: The IRS continues to maintain that it is targeting higher-income taxpayers. However, media reports between 2019 and 2022 reveal the agency commonly targets low-wage earners.
- Automated Substitute for Return Program (ASFR): This initiative prepares substitute tax returns for delinquent taxpayers who have otherwise filed no return. The return is based upon documentation and data to which the IRS has access.
- Campus Automated 602(b) program: Focused on delinquent payroll tax issues, this program aims at businesses with delinquent employment taxes who have not remained compliant.
The tools and capabilities of the IRS to collect past-due taxes should not be taken lightly. The IRS basically has the ability to calculate and create your delinquent tax returns. Those returns do not include deductions for expenses and other tax credits you may have earned. You are provided an assessment when the return is prepared for the tax due to the IRS. While you can then choose to file a return, the likelihood of continued IRS review is high and could lead to an IRS audit.
While it is not clear that the IRS is making good on its promise to pursue high-income non-filers, it is clear that eventually failure to file will be noticed and a remedy applied. If evidence of evasion is identified, tax fraud or other tax crimes could be on the table.
If you missed filing one or more tax returns, speak to an experienced tax attorney about your options. Your business is your own—until the IRS is involved.
Facing a tax controversy or criminal tax charge from the IRS?
Serving local and international clients from offices in Chicago and Cleveland, the tax group at Robert J. Fedor, Esq., LLC helps you respond strategically to questions about IRS audits, offshore tax investment, or allegations surrounding fraudulent tax returns. Call 800-579-0997 or contact us today.