In the recent past, the IRS was not aggressively pursuing taxpayers who failed to file returns, including high income taxpayers, because of a lack of funding. This is all now changing.
On February 29, 2024. the IRS announced in IR-2024-56, a new initiative focusing on high-income taxpayers who failed to file federal income tax returns since 2017. The goal is to bring said taxpayers into current filing and payment compliance.
On this same date, the IRS also released Fact Sheet 2024-6 explaining what to expect after receiving a CP59 Notice https://www.irs.gov/individuals/understanding-your-cp59-notice. This is the non-filer compliance alert notice the IRS started sending out during the week of February 29, 2024 to more than 125,000 taxpayers. According to the IRS press release, “The mailings include more than” 100,000 to people with incomes between $400,000 and $1 million and over 25,000 to those with more than $1 million in income. The years are 2017 through 2021.
Further, per the IRS, “[t]hese are all cases where IRS has received third-party information—such as through Forms W-2 and 1099s—indicating these people received income in these ranges but failed to file a tax return.”
Taxpayers who do not respond to the non-filer letter will receive other notices which will likely result in a variety of IRS collection activity including estimated tax returns being prepared, audit actions, liens, seizures and potential criminal prosecution.
Failure to file may result in estimated or substitute tax returns based on wages and other income reported to it. These tax returns are not going to account for offsets such as credits for children, business expenses, offsetting deductions and exemptions they may be entitled to receive as the IRS is not privy to this information.
The press release also advises that people who receive these notices should “consult with a trusted tax professional so they can quickly file their late tax returns and pay delinquent tax, interest and penalties. The failure-to-file penalty amounts to 5% of the amount owed every month – up to 25% of the tax bill.”
Kundra and Associates has successfully handled many of these cases in the past and is available to help.