As noted in our previous post, available here, the Internal Revenue Service (IRS) has announced that it will target high-income taxpayers in its future enforcement efforts. Within this focus, the agency has further clarified it will specifically target those who failed to file tax returns as well as those who are connected with pass-through entities.
The IRS’ focus on nonfilers is likely the result of a recent report by the Treasury Inspector General for Tax Administration (TIGTA). In this report, the TIGTA states the IRS has missed out on over $30 billion in tax revenue from 2011 through 2013 by failing to hold high-income taxpayers accountable when they fail to file their tax returns. A failure to file returns comes with more than just concern for the year the IRS notes in its initial audit inquiry. If the agency can establish that the taxpayer failed to file returns, they can have an extended reach back into the taxpayer’s history. In some cases this can result in a reach back that allows the agency to audit at least the past six years’ worth of tax returns.
IRS officials have also announced that they will increase audits for individuals connected with pass-through entities such as S corporations and partnerships.
Taxpayers who receive notification of an audit have options. They can build a defense to the audit and provide paperwork to support the claim. They also may have valid reasons for failing to file. Determining the best course of action will vary depending on the details of each case. The attorneys at Goldburd McCone are familiar with these cases and can tailor a defense to each situation, better ensuring a more favorable outcome.