The Treasury Inspector General for Tax Administration has accused the Internal Revenue Service (IRS) of failing to pursue high income tax evaders. For the purposes of this report, the agency defined a high-income taxpayer as those who earn $100,000 or more annually. According to the report, 879,415 of these high-income taxpayers failed to file tax returns between 2014 and 2016. The researchers behind the report estimate that this failure resulted in over $45 billion in lost revenue.
What does this mean?
The IRS will likely receive increased pressure from the government to investigate and pursue these filings. Although the agency did not publicly comment on the findings published by the agency, they did state they would prioritize investigation of those who fail to file their tax returns.
This could mean two things. First, it could mean taxpayers will notice an increase in audits. If the IRS takes the advice of the researchers, the audits will focus on high income earners.
There is also an increased likelihood the agency will send out automated non-filing notices. Those who receive such notices are wise to seek legal counsel to review their options. A failure to take the notice seriously could increase the risk of a more invasive audit.
What happens if the government accuses a taxpayer of failing to file their tax returns?
According to a publication in Bloomberg that discusses the report, the issue could continue to grow as the rate of non-filers is on the rise. Those who are accused of intentionally failing to file their tax returns can face serious criminal penalties. If the government is able to build a successful case this can include hefty fines as well as up to five years imprisonment.