What Exactly is Nonfiler Enforcement?

paying taxesSome people file false income tax returns, and others embellish or otherwise engage in tax fraud on their annual returns. Then there are the taxpayers that just do not file at all—the Internal Revenue Service (IRS) calls them “nonfilers.”


We have discussed the tax gap in the United States before. Basically, the tax gap is the difference between the amount of tax collected, and the amount of tax that should have been collected if all US persons were filing their taxes annually and appropriately.


Failure to file contributes significantly to the tax gap. In 2019, the IRS reported the nonfiler tax gap was approximately $39 billion. In the recent past, the IRS has not made a driving effort to punish nonfilers. Instead, during an IRS audit or a criminal tax investigation, nonfilers are often identified. Otherwise, nonfiler enforcement by the IRS includes outreach, education, and then enforcement.


In February of 2020, the IRS announced it was shifting gears on nonfiler enforcement by planning visits and outreach to high asset taxpayers who had fallen off the tax table in recent years. High income taxpayers are defined as those who earned at least $100,000 and did not file an income tax return in 2018 or other recent years.


In February, the plan was for high visibility, in-person interviews. Noted Paul Mamo of the IRS Small Business/Self/Employed Division, "The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes. These visits focusing on high-income taxpayers will be taking place across the country. We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later."


In its press release on the campaign, the IRS suggested taxpayers work with a tax advisor to become compliant on their filing before being contacted by the IRS. Clearly the announcement itself was intended to have a deterrent effect on nonfilers. 


Without a doubt, the measure is required to improve compliance and boost tax revenue. In the intervening months, however, this and other enforcement initiatives have been suspended in the face of the spreading pandemic. A “new normal” of IRS enforcement operations may, like most other businesses, actually include fewer face-to-face interviews and adaptation to remote meetings and audits.


One measure of governmental relief from the pandemic crises has been the distribution of stimulus checks to American taxpayers. Nonfilers must register in order to receive a stimulus check, which could lead to increased compliance in the coming years, although this may not entice high income nonfilers to step up.


One thing is for sure: if you are a nonfiler, it will catch up with you at some point. It does not pay to be on the radar of the IRS. Talk to an experienced tax attorney or accountant to understand what you can do to avoid it.


Speak with an experienced tax lawyer if you are contacted by the IRS on a civil audit or criminal tax matter

Serving international and local clients from offices in Chicago and Cleveland, Illinois, the legal team at Robert J. Fedor, Esq., LLC provides personal, high quality legal service. Call us if you have questions about tax litigation or another tax controversy. Call us at 800-579-0997 or contact us today.


Understanding Tax Fraud