The wealthy are rarely caught by the IRS for not paying their taxes

hhoffower@businessinsider.com (Hillary Hoffower)
The IRS' strategy for the wealthy who don't file their taxes isn't effective.

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  • The wealthy are rarely caught for not filing their taxes, according to a recent audit by the Treasury Inspector General for Tax Administration.
  • From 2014 to 2016, a collective $45.7 billion was owed by 879,415 high-income nonfilers.
  • Of these nonfilers, 369,180 weren't worked on by the IRS for tax collection and 510,235 are sitting in the IRS' inventory to be worked on — and they likely won't be because of declining resources.
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The IRS is rarely chasing down the wealthy who don't file their taxes, a recent audit by the Treasury Inspector General for Tax Administration (TIGTA) found.

TIGTA conducted the audit to determine if the IRS' strategy for high-income nonfilers — which was developed to contact taxpayers with significant income tax liability who hadn't voluntarily filed tax returns — is effective. Turns out, it's not. 

From 2014 to 2016, 879,415 high-income nonfilers didn't meet filing requirements and owed a collective $45.7 billion, according to the TIGTA's analysis. Of these nonfilers, 369,180 weren't "being worked" by the IRS for tax collection. They had an estimated tax due of $20.8 billion. The majority — 326,579 — weren't even placed into inventory to be worked. And the remaining 42,601 were closed out of the inventory without ever being pursued.

The other 510,235 high-income nonfilers — who have a collective estimated tax due of $24.9 billion — are currently sitting in the IRS' inventory. But it's likely they won't be pursued due to declining resources, per the report. The IRS also removed 37,217 high-income nonfiler cases from its inventory that totaled an estimated $3.2 billion in tax dollars.

The top 100 high-income nonfilers during this two-year span not addressed or resolved by the IRS owe an estimated $9.9 billion in taxes, the report stated.

In February, the IRS stated it would heighten efforts to visit high-income taxpayers who failed to file one or more of their tax returns on time in 2018 or prior. It planned to increase in-person visits before the pandemic struck.

"The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes," Paul Mamo, the director of collection operations in the small business/self-employed division, said in a press release.

While the IRS is still conducting testing, states the TIGTA, its new non-filer strategy hasn't been implemented and is spread across multiple departments without a direct overseer.

As for the 2019 tax season, the tax filing and payment deadline has been extended until July 15 — 90 days past the original tax-day deadline. The IRS is only processing electronic returns right now, so if you still need to file, use the IRS Free File portal or go directly to a third-party online tax preparer.

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