The Internal Revenue Service (IRS) has repeatedly stated that it will focus its efforts on high-income non-filers. Uncle Sam states taxpayers who have significant income but fail to contribute their “fair share” in income tax returns are one of the biggest reasons for the federal tax gap or the measure of non-compliance when it comes to paying one’s taxes.
Who are high-income non-filers?
This group generally involves those who earn over $100,000 but fail to file an income tax return. According to the Treasury Inspector General for Tax Administration, this group is responsible for a large portion of the federal tax gap. The group states that of the $39 billion in taxes owed attributed to non-filers, $37 billion is due to high-income non-filers.
How does the IRS find these alleged non-filers?
The IRS has a range of tools to search for those who fail to file their tax returns. These can include:
- Whistleblowers. Individuals can reach out directly to the IRS and provide information about those who they believe are not paying their tax obligations.
- Tax treaty and information exchange laws. Various laws are in place that require financial institutions, both here and abroad, to report information about accounts of United States citizens to the U.S. government.
- Tax reporting for cryptocurrency. The feds have also increased reporting requirements when it comes to this relatively new form of currency in an effort to increase compliance.
The IRS is also increasing its use of third-party reporting measures and data analytics to efficiently find those who fail to file their returns.
What if I am behind in filing my returns?
Those who have not filed their returns should note that the statute of limitations, or the time limit, that the feds have to audit taxes on unfiled returns is essentially forever. The IRS is getting more tools and is increasing in its efficiency. As such, it is wise to take proactive measures to ensure compliance. The legal professionals at Goldburd McCone are familiar with various compliance options and can discuss the risks and benefits of each.