High-Earning Non-filers Focus of Latest IRS Enforcement Campaign

In the latest announcement from the IRS on compliance enforcement activities funded by the Inflation Reduction Act (PL 117-169), Commissioner Danny Werfel says the agency will begin issuing notices to a group of high-income taxpayers that have not filed federal tax returns in recent years despite ample financial activity. (IR 2024-56, 2/29/2024; Fact Sheet 2024-6)

According to the commissioner, 125,000 cases have been identified where taxpayers making above $400,000 have not filed their taxes since 2017. Based on third-party information, an estimated $100 billion in financial activity has not been reported from this group, which includes millionaires.

These taxpayers will begin receiving CP-59 notices in the mail this week. The IRS plans to send the notices in waves of 20,000 to 40,000 each week, starting with those in the highest income categories. Thursday’s announcement clarified, though, that some taxpayers are repeat non-filers. In other words, the 125,000 figure does not mean there are that many individuals identified by the newest enforcement initiative.

“At this time of year when millions of hard-working people are doing the right thing paying their taxes, we cannot tolerate those with higher incomes failing to do a basic civic duty of filing a tax return,” said Werfel. “The IRS is taking this step to address this most basic form of non-compliance, which includes many who are engaged in tax evasion. This is one of the clearest examples of the need to have a properly funded IRS.”

He added that the Inflation Reduction Act has made it possible for the agency to sufficiently pursue what, realistically, is an unknown amount of total potential revenue. While the 10-year funding is bolstering the non-filer program to administer wide-spread notice mailings, the IRS cannot yet determine what credits or deductions these taxpayers are entitled to. Some, read the announcement, may actually be entitled to a refund. Using a conservative estimate, though, the agency expects “hundreds of millions of dollars of unpaid taxes are involved in these cases.”

This year has seen the IRS launch several focused compliance initiatives intended to close the tax gap from various high-dollar sources, including those the IRS expects may be at risk of tax avoidance behaviors. Last week, the IRS announced it is conducting audits around the improper use of corporate aircraft for personal uses. In January, the IRS announced it has recouped more than half a billion dollars from not only wealthy individuals, but also complex partnerships and large corporations. Inflation Reduction Act resources are funding AI-leveraged examinations and reviews of significant balance sheet discrepancies.

“If someone hasn’t filed a tax return for previous years, this is the time to review their situation and make it right,” Werfel said. “For those who owe, the risk will just grow over time as will the potential for penalties and interest.”