IRS Cracks Down on Millionaires Who Failed to File Tax Returns

In a recent announcement, the IRS is initiating a new program to target high-income non-filers. This new effort will focus on 125,000 cases involving high earners, including millionaires, who didn’t file tax returns despite financial activity exceeding $100 billion.

This effort is aimed at those who have not filed federal income tax returns in over 125,000 cases since 2017, as part of the IRS’s ongoing commitment to improve tax compliance and fairness.

These cases were opened because the IRS has received third-party information, such as Forms W-2 and 1099s, indicating that these individuals earned income within these ranges but did not file a tax return.

Due to significant budget and staff constraints in past years, the IRS non-filer program has operated intermittently since 2016, preventing these cases from being addressed.

However, with the availability of new funding from the Inflation Reduction Act, the IRS now has the resources to carry out this fundamental tax administration work.

“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 IRS Commissioner Danny 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. With the Inflation Reduction Act resources, the agency finally has the funding to identify non-filers, ensure they meet this core civic responsibility, and ultimately help ensure fairness for everyone who plays by the rules.”

What Target Millionaires Who Failed to File Taxes Need to Anticipate

The IRS begain mailing these compliance alerts for failure to file a tax return over the last week. These alerts are formally known as the CP59 notice.

About 20,000 to 40,000 letters will go out each week, beginning with the filers in the highest-income categories. Some of these non-filers have multiple years of non-filing included in the case count, so the number of taxpayers receiving these notices will be smaller than the actual number of notices.

If you receive one or more of these notices, you should take immediate action to avoid additional follow-up notices, higher penalties as well as increasingly stronger enforcement measures.

People in this category should also consult with a trusted tax professional so they can quickly file their late tax returns and pay delinquent tax, interest and penalties.

The failure-to-file penalty amounts to 5% of the amount owed every month – up to 25% of the tax bill. There is also special non-filer information on that can assist them.

The IRS is Ramping Up Collection Activity

The new non-filer initiative is part of a larger effort underway with the IRS working to ensure large corporate, large partnership and high-income individual filers pay the taxes they owe. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to shelter or manipulate their income to avoid taxes. The IRS is now taking swift and aggressive action to close this gap.

Read the full IRS Announcement here.