The Internal Revenue Service (IRS) targets high-income earners because they have a significant impact on tax revenue. Non-compliance among high-income individuals can disproportionately affect lower-income taxpayers who may have fewer resources to navigate their tax obligations.
In February of 2024, the IRS launched a new effort to go after high-income earners who have not filed their tax returns. This effort focuses on more than 125,000 cases dating back to 2017. Compliance letters have been sent to many of those who are being targeted. If recipients do not respond, they may face audits, or criminal tax investigations followed by serious civil and criminal penalties.
If you need help resolving a tax issue, connect with our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295.
Overview of the New IRS Initiative
The IRS has launched a new initiative to address non-compliance among high-income taxpayers who have failed to file federal income tax returns. This effort is funded by the Inflation Reduction Act and targets a multitude of taxpayers who have missed returns since 2017. Many of these cases involve individuals with incomes exceeding $1 million.
Compliance Letters and Initial Enforcement Measures
The IRS began sending compliance letters, also referred to as “CP59 notices,” to non-filers in late February 2024. These letters urge recipients to take immediate action to avoid potential penalties. Failure to respond to these letters may result in stronger enforcement actions, including audits, collection measures, and potential criminal tax prosecution which can result in felony tax charges for Spies Evasion. The IRS may also file Substitutes for Returns (SFRs) for taxpayers who repeatedly fail to respond.
Potential Revenue
As previously discussed, this new initiative targets individuals with significant financial resources. While the exact amount of unpaid taxes at issue is uncertain, the IRS estimates potential revenue gains from this initiative to be in the hundreds of millions of dollars.
Motivations
This initiative is part of a broader IRS effort to improve tax compliance among high-income individuals, complicated partnerships, and large corporations. Prior to receiving funding from the Inflation Reduction Act, budget cuts limited the IRS’ ability to address complex tax evasion schemes effectively. Now, the IRS has ramped up its enforcement efforts with increased resources.
Potential Consequences of Non-Compliance
It is crucial for non-filers to have our Dual-Licensed Tax Lawyers & CPAs assess their tax issues promptly so that they may avoid serious penalties. Failure to file tax returns can lead to harmful consequences such as wage garnishment and the assessment of federal tax liens. In severe cases, taxpayers who do not respond to IRS notices may even face criminal tax prosecution.
How Does the IRS Catch High-Income Tax Evaders?
Many perpetrators of tax evasion schemes do not consider the many ways in which they may be caught. In fact, the IRS utilizes a multitude of different strategies to uncover these illegal schemes.
Advanced Data Analysis and Artificial Intelligence
The IRS uses advanced data analysis techniques and artificial intelligence (AI) to identify potential instances of tax evasion. By analyzing vast amounts of financial data, the agency can pinpoint irregularities in income reporting and detect potential evasion schemes. AI algorithms also help streamline this process and enable the IRS to identify high-risk taxpayers more efficiently.
Audits and Enforcement Measures
Audits and enforcement measures are often deployed to catch tax evaders. During audits, the IRS thoroughly examines taxpayers’ financial records and transactions to ensure compliance.
Collaboration with Other Agencies
The IRS also collaborates with other federal and state government agencies and law enforcement entities to catch tax evaders. Information sharing between agencies allows for a comprehensive assessment of taxpayers’ financial activities and facilitates the identification of potential misconduct.
Whistleblower Program
Furthermore, the IRS’s whistleblower program incentivizes individuals with insider knowledge of tax evasion to come forward and report wrongdoing. Whistleblowers may receive monetary rewards for providing credible information leading to the recovery of unpaid taxes. This program can serve as a very valuable tool for identifying tax evasion among high-income individuals and corporations.
International Cooperation and Information Exchange
The IRS also collaborates with tax authorities in other countries to combat tax evasion on a global scale. The IRS may gain access to offshore financial data through information-sharing agreements. In turn, they may identify taxpayers who are hiding income or assets overseas.
Specialized Units and Task Forces
Lastly, the IRS maintains specialized units and task forces dedicated to investigating complex tax evasion cases, including those involving high-income taxpayers. These units consist of highly trained agents and forensic accountants skilled in unraveling sophisticated schemes.
Can You Go to Prison for Tax Evasion?
Tax evasion can lead to imprisonment under certain circumstances.
For instance, tax evaders can face prison time for intentionally and willfully evading taxes by underreporting income, overstating deductions, or engaging in other fraudulent activities to reduce tax liabilities and for non-filing, especially where Spies Evasion Factors are present.
The government will typically evaluate the severity of the offense at issue, and the amount of taxes evaded when assessing the possibility of incarceration. Typically, imprisonment for tax evasion is generally reserved for cases involving significant fraud or repeated non-compliance.
How Our Tax Lawyers & CPAs Can Help with Your Case
Our team can provide invaluable assistance to individuals and businesses facing tax-related issues. Our legal professionals possess extensive knowledge of tax laws and regulations. This enables us to offer strategic advice and representation to those dealing with the IRS.
For example, we can help our clients navigate complex tax codes, interpret statutes, and ensure compliance with tax obligations while maximizing available deductions and credits. We can also provide guidance on tax planning strategies to help avoid potential pitfalls.
Moreover, we can represent our clients in audits, appeals, and tax court proceedings. During these proceedings, we will advocate fiercely for defendants’ best interests and will negotiate for settlements when necessary. Overall, our guidance and advocacy can help individuals and businesses effectively resolve their disputes while mitigating possible penalties.
Call Our Law Firm for Help Resolving Your Tax Problems
Get support from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by dialing (800) 681-1295.
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