In the coming months, the IRS will proceed with its focus on high-income taxpayers who have yet to file their tax returns. The potential for significant penalties, limited voluntary disclosure options, and possible criminal prosecution is abounding.
The IRS issued IR-2020-34 on Feb. 19, 2020, where the IRS states that it will ” step up efforts to visit high-income taxpayers who in prior years have failed to timely file one or more of their tax returns.” Armed with sophisticated data analytics to identify the high-income non-filers and businesses with large amounts of unpaid employment taxes, the IRS is on the move.
The IRS imposes substantial additions to tax for a failure to file a tax return. IRC 6651(a)(1) And with fraud referrals from the IRS Collection Division on the rise, potential criminal consequences become even more real. While it is a misdemeanor to failure to file a return, convicted taxpayers may be fined up to $25,000 ($100,000 for corporations) and up to one year in prison. See, IRC 7203. Under IRC 7201, a willful failure to file, combined with affirmative acts of evasion, could lead to a potential felony conviction for tax evasion, which can result in up to five years in prison.