In its May 29, 2020 report, the Treasury Inspector General for Tax Administration (TIGTA) admonished the IRS, finding that high-income nonfilers owing billions of dollars are not being worked by the Internal Revenue Service.
The report notes that “pursuing nonfilers is one of the IRS’s most efficient enforcement strategies because issuing nonfiler notices can be a cost-effective tool that requires little more than automated notices.”
Studies from decades ago show that the IRS pursued most nonfiler leads but that is no longer the case.
In reviewing nonfilers from tax periods 2014 through 2016, TIGTA identified 879,415 high income nonfilers.
These nonfilers owe a collective $45.7 billion.
In reviewing these 879,415 nonfilers, TIGTA found that as of December 2018:
- The IRS did not work 369,180 high-income nonfilers. They were either not placed in inventory to be selected for work or were closed out of the inventory without being worked.
- The remaining 510,235 high income nonfilers are in the IRS Collection function’s queue and will likely not be pursued as resources decline.
Fraudulent failure to file
Certain situations can result in fraudulent failure to file penalties, and in rarer situations, criminal prosecution:
- You are a high-income earner and expect to owe a substantial amount in taxes, and especially if you’ve been stashing the money away in IRAs or paying off your mortgage, instead of paying the IRS
- You expect to owe over $100,000 in back taxes after filing the returns
- You have a history of nonfiling, accumulating back taxes, or have been repeatedly contacted by IRS for nonfiling
- You have education or experience in tax matters – for example, if you are a law professor, CPA, or tax attorney
- Have a history of criminal tax prosecutions
- Have a history of filing false returns, overstating expenses, or not reporting income on your tax returns
- You are under audit for nonfiling
- You have a large number of cash transactions
- Any other situations where you might need attorney-client privilege
What to do if you’re behind
If you haven’t been contacted by the IRS about your missing returns, you should file your returns as soon as possible, after discussing with a tax attorney, if any indicators of fraud are present, or if you’re not sure.
If you have been contacted for a non-filer audit or investigation, you should take the notice very seriously and seek professional counsel.
How far back do you need to go?
The IRS typically does not require a taxpayer to file more than 6 years of delinquent tax returns. That means in most cases, you should file the current year return and the 6 previous returns.