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High-income non-filers owe billions, but for how long will the IRS leaves them alone?

| Jun 12, 2020 | audits, back taxes or tax debt

Once January rolls around every year, people shift gears from talking about the holidays and New Year’s resolutions to planning for the inevitable tax season. The vast majority of Americans pay their taxes in full and on-time.

It might surprise most people to learn, however, that some of the most notable non-filers are those who earn a higher income than most U.S. citizens. According to an audit performed by the Treasury Inspector General for Tax Administration, these high-income non-filers owe billions of dollars to the U.S. government, and to make matters worse, the IRS does not expend an equal amount of time pursuing those claims.

The tax gap and its impact on the average taxpayer

The tax gap is calculated every year by the IRS. This number showcases the difference between the amount of taxes that are owed in total by taxpayers in the United States, and the amount that was actually paid in full and on-time. According to the TIGTA report, the Tax Gap between 2011 and 2013 was $441 billion. Of that total, 9 percent – or $39 billion – was due to non-filers. The vast majority of that $39 billion was the result of high-income earners not filing or paying their taxes on time or in full.

The report produced by TIGTA highlights this inequity, and strives to encourage the IRS to pursue high-income non-filers more aggressively.

High-income non-filers: by the numbers

Here are some numbers from that study to consider:

  • 879,415 high-income earners did not satisfy their tax filing requirement.
  • These high-income non-filers owed a total of $45.7 billion in taxes.
  • 369,180 high-income non-filers were not pursued by the IRS. In total, this group of non-filers owed $20.8 billion.

In some cases, the high-income non-filers were never put into the lottery of cases to be worked. In other cases, they were closed out automatically, and an additional batch were never worked due to dwindling resources within the IRS.

How long before the IRS starts to pursue?

The TIGTA report made several recommendations to the IRS in order to help it become more aware of this major issue with the tax gap and to encourage them to work cases involving high-income non-filers.

The fact of the matter is, you have to pay your taxes. In all likelihood, if you try to avoid making these payments each year, the IRS will come after you. If you have fallen behind on your tax payments, the best time to talk to a tax attorney is right now.

For more information on tax law and how it impacts your case, contact our law firm today.