The IRS is allocating more resources to collect taxes from high income taxpayers who fail to file their tax returns
Taxpayers Who Made Over $100,000 & Not Filed a Return Before 2019 Are Being Targeted
IRS Office of Fraud Enforcement Prioritizing the Most Egregious Non-filer Cases
The IRS is concerned about the perception held by many taxpayers that high income taxpayers do not pay their fair share of taxes. Accordingly, it is placing a renewed focus on wealthy individuals who live in the US and abroad who are not paying their taxes.
What Is the IRS’s Renewed Focus on High Income Taxpayers?
The IRS has identified and contacted taxpayers who made more than $100,000 and had not filed a tax return before 2019 to ensure they understood their obligation to file and pay income taxes.
Most of those taxpayers responded and have either filed or paid their tax obligations, or are using an IRS payment plan option.
For those non-filers who didn’t respond, the IRS assigned revenue officers (ROs) — its civil enforcement officers — and prioritized the most egregious non-filer cases so they can reach out to non-responsive taxpayers directly.
The IRS had expected to have its compliance officers meet face-to-face with the non-responsive taxpayers, but COVID-19 delayed those in-person visits. Despite this, the IRS has identified about 1,500 of the most serious ones, many with millions of dollars of suspected unclaimed incomes. The ROs worked hundreds of these cases within the first 60 days of the higher-income enforcement effort, starting in February 2020.
Some of the high-income non-filer cases from this year’s focused effort — and others that taxpayers didn’t resolve — are being handled by the IRS’s new Office of Fraud Enforcement. Created earlier this year, per the IRS, the office acts a bit like a computer’s Central Processing Unit, or CPU. It connects the dots across all IRS divisions, and sometimes across federal agencies, to confront emerging threats and bring offenders to justice with both civil and criminal penalties.
The office is also reviewing high income non-filer cases that will be referred to the IRS Criminal Investigation Division to potentially be pursued criminally for offenses, including failure to file, tax evasion and tax fraud.
Is the Renewed Focus Productive?
Blatant tax offenders can face large penalties, including interest and back taxes, and even serve prison time. The IRS has publicized one such case on its website, Alabama salesman. As court documents note, he stopped filing taxes, thinking he could hide his income overseas and used other tactics to avoid paying taxes. He’s now paying back more than $1 million owed and was sentenced to two years in prison.
If I Don’t File a Tax Return, How Can the IRS Find Me?
Per the IRS, a common misperception among non-filers is that by not filing a return, they won’t be caught. The IRS says, “Even if they don’t file, we still have ways to know how much income they should be reporting. We have a robust system to collect information from many sources to identify possible tax issues, including multiple third-party sources, taxpayers’ previous filing histories and their addresses. We also have other legal avenues that provide potential information for cases including:
Information provided to the IRS whistleblower program
Information received from United States Attorney offices across the country
Ongoing investigations by other law enforcement agencies
Tips from colleagues, neighbors and friends
Tax treaty and information exchange per case investigation requests”
Tax evasion can lead to both civil and criminal charges. The IRS is becoming more adept at identifying non-filers and foreign countries are increasingly working with the IRS to identify these non-compliant taxpayers. File your tax returns and remember that you are signing those returns under penalty of perjury.
Find a competent tax professional to ensure that all deductions are claimed and exclusions of income allowed by the Internal Revenue Code, IRS regulations, tax treaties, etc. are considered. If you have income sources from outside the U.S., work with tax professionals in those countries outside the U.S.
There are legitimate tax resolution firms. The challenge is finding a firm that has an excellent tax resolution reputation and the necessary training and experience. Some taxpayers mistakenly assume that their tax professional has the necessary qualifications. Look at your tax professional’s website. If they don’t specialize in solving IRS tax problems, ask them for a referral. A CPA, enrolled agent or attorney who does tax representation work without being qualified to do so, runs afoul of IRS Circular 230.
If your tax professional is unable to recommend such an expert, call the American Society of Tax Problem Solvers at (716) 630-1650 and request 2-3 referrals located near you. We recommend that you deal with a local company where you can meet the persons who will be representing you.
Do your due diligence. Check with the Better Business Bureau and the state attorney general office to see if complaints have been filed against the firm you are considering using.
While you can submit your own OIC without using a tax representative which will save you the representation fee, it is often more expensive to do so. A specialist knows how to negotiate with the IRS and what expenses it will accept and the exceptions to the general rules that the IRS will allow. If you have an experienced tax professional working your case, your offer amount will likely be significantly less than that you would compute.
If you are determined to submit your own OIC, we suggest that you first read “How to Resolve Your IRS Tax Debt Problems”.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander, an Enrolled Agent and a Certified Tax Resolution Specialist, is an affiliate member of the Suburban West Realtors® Association, a member of the American Society of Tax Problem Solvers (ASTPS), PA Society of Tax & Accounting Professionals (PSTAP), the National Society of Accountants (NSA) and the National Association of Tax Professionals (NATP). He is the author of “How to Resolve Your IRS Tax Debt Problems” as well as a book on how to start your own business. He has been practicing in Exton for 19 years. His firm serves clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
For individual tax payers, real estate professionals, contractors and other self-employed individuals with IRS tax debt issues or tax planning issues, feel free to contact me at (610) 594-2601 or by email at firstname.lastname@example.org.
Keystone Financial Solutions, Inc. specializes in providing innovative tax planning, tax preparation, and solving IRS tax debt problems. The company’s web site is https://www.keysolutions.us and its telephone number is (610) 594-2601.
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