Wealth

IRS targets wealthy ‘non-filers’ with new wave of compliance letters

IRS Commissioner Daniel Werfel speaks during an IRS event in McLean, Virginia, on Aug. 2, 2023.
Alex Wong | Getty Images

The IRS has unveiled plans to target “non-filers” with a new round of letters, starting with high-income taxpayers who haven’t filed federal returns since 2017.

Starting this week, the agency will send letters to wealthy non-filers, with the first batch going to those earning $400,000 to more than $1 million.

Formerly known as CP-59 notices, the letters will go to between 20,000 and 40,000 non-filers per week, according to plans announced Thursday. The IRS said recipients should take “immediate action” to avoid more letters, higher penalties and “stronger enforcement measures.” Non-filers can learn more about past-due returns here.

More from Personal Finance:
This IRS issue is ‘the biggest, most consistent problem’ for filers, expert says
Number of 401(k) millionaires and average balances rose in 2023, Fidelity says
‘Ghosting’ gets more common in the job market: It’s not a ‘passing fad,’ report notes

“If someone hasn’t filed a tax return, this is the time to make it right,” IRS Commissioner Danny Werfel told reporters during a press call. Citing staffing issues, he said the non-filer program has only run sporadically since 2016.

The failure-to-file penalty is 5% of the amount owed per month, capped at 25% of the tax bill, according to the IRS. There’s also an interest-based penalty based on the current interest rate.

The agency urges non-filers to work with a tax professional to file past-due returns and calculate taxes owed, penalties and interest.    

‘Historically low audit rates’ for higher earners

The new wave of letters comes amid IRS plans to reverse “historically low audit rates” of large corporations, complex partnerships and higher earners.

The audit rate for taxpayers earning $1 million or more was 0.7% in 2019, compared to 7.2% in 2011, according to the IRS.

While it’s unclear exactly how much the IRS will collect via the revamped non-filer program, the agency estimates there could be “hundreds of millions of dollars” in unpaid taxes from these cases.

“This is a very material amount of money that is being left on the table,” Werfel said Thursday.

Articles You May Like

Wells Fargo earnings top estimates even as lower interest income cuts into profits
The Fed is determined not to reduce interest rates too soon, experts say — a mistake the central bank has made in the past
Ford prepares to resume F-150 Lightning shipments, drops prices on some models
Toyota’s first new 4Runner SUV in 15 years will offer a hybrid engine
What Biden’s new student loan forgiveness plan means for your taxes

Leave a Reply

Your email address will not be published. Required fields are marked *