A new report by the Treasury Inspector General for Tax Administration (TIGTA) revealed that the IRS is doing very little to pursue high-income taxpayers who are non-compliant in their filing of federal tax returns. TIGTA is a Treasury Department internal watchdog that provides an ongoing critique of the IRS and its processes. When TIGTA identifies a potential shortcoming of the IRS, Service officials typically attempt to rectify the situation, meaning that high-income taxpayers who have failed to file their tax returns (or pay outstanding balances) should contact an experienced tax attorney as soon as possible to develop a fact-specific plan to come into compliance.
According to the report, which chiefly focused on taxpayers who filed for extensions that had since expired, estimated that 1.9 million taxpayers with lapsed extensions owed more than $7.4 billion for tax years 2012 and 2013 alone. Estimates suggest that nearly 20 percent of American taxpayers fail to file their federal tax return, annually.
Industry professionals and IRS officials point to the lack of resources provided to the Service by Congress. IRS funding has been steadily decreasing over the past several years, as some believe that Congress is punishing the entity for alleged targeting of conservative tax-exempt organizations. Although the TIGTA report acknowledges the diminished resources, they pointed out that going after noncompliant high-earning taxpayers was supposed to be a priority for the Service.
On a yearly basis, the IRS identifies over 7 million non-filers and has the ability to send them notices of deficiency. Non-filers are typically identified through third-party reporting, such as an employer sending the IRS record of an employee’s W-2 wages or 1099 income. Estimates indicate that the Treasury loses out on over $26 billion dollars per year in federal tax noncompliance, which represents six percent of the estimated $458 billion tax gap created by those who do not pay their taxes. Two years ago, the IRS laid out plans to ramp up its crackdown on noncompliant taxpayers, but to date hasn’t implemented any new efforts or initiatives.
The effects of the IRS budget cuts are apparent when you consider that in 2011, the Service collected $3.6 billion from non-filers, but only collected $290 million in 2013. The Service notes that they simply do not have the manpower or the availability to utilize overtime hours to recover additional funds. But in response, the IRS has estimated that they will be able to recover over $2.5 billion annually, going forward.
Taxpayers who have failed to file their tax returns should fear the IRS response to the TIGTA report. Now that the Service’s inefficiencies have been exposed, there will likely be a strong attempt to dramatically increase collection amounts for those who are noncompliant. Additionally, when the IRS discovers that someone has failed to file their tax returns for several years, it is very possible that the case will be turned over to the IRS Criminal Investigation Division for potential referral to the Department of Justice for prosecution.
The Importance of Contacting an Experienced Tax Attorney as Soon as Possible
Although taxpayers may feel the desire to stay noncompliant in hopes that the IRS will not discover them, consulting with an experienced tax attorney about your situation will ensure that you develop the right strategy to minimize (or eliminate) repercussions for failing to file your tax returns. A tax non-filer can face up to a year in prison for each tax return that wasn’t filed. Furthermore, hefty fines and penalties can be levied for each year that taxes went unfiled and unpaid. Only a tax attorney can give you legal advice as to your rights and responsibilities when getting current with your taxes.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in working with taxpayers who are delinquent in the filing of their federal tax returns. Our zealous advocates are ready to gather the facts specific to your situation and develop a personalized plan of action. Don’t let the threat of criminal prosecution for failure to file your taxes keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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