IRS Targets High-Income Earners who Do Not File Tax Returns

IRS Targets High-Income Earners who Do Not File Tax Returns

The IRS Targets High-Income Earners

In general, the chance of being audited by the IRS is (relatively) small. The Internal Revenue Service is short on staff – and very behind in processing tax returns for prior years. In addition, there is a Statute of Limitations as to how long the US Government has to initiate an IRS Audit or criminal investigation, before the time to do so expires — unless no tax return is filed, and so the statute of limitation never commences. The IRS has to be judicious with its resources, and so it seems they will be focusing specifically on High-Income Earners in the upcoming years. Especially, those who know they are required to file, but willfully fail to file their tax returns. So much so,  that the IRS specifically included “High-Income Earners who don’t file tax returns” on their 2022 dirty dozen tax scam list.

As provided by the IRS: 

High-income individuals who don’t file tax returns: 

      • The IRS continues to focus on people who choose to ignore the law and not file a tax return, especially those individuals earning more than $100,000 a year.

      • Taxpayers who exercise their best efforts to file their tax returns and pay their taxes, or enter into agreements to pay their taxes, deserve to know that the IRS is pursuing others who have failed to satisfy their filing and payment obligations. The good news is most people file on time and pay their fair share of tax.

      • Those who choose not to file a return even when they have a legal filing requirement, and especially those earning more than $100,000 per year who don’t file, represent a compliance problem that continues to be a top priority of the IRS.

      • Here’s a key reminder for taxpayers who may be wrongly persuaded that not filing their return is a smart move. The Failure to File Penalty is initially much higher than the Failure to Pay Penalty. It is more advantageous to file an accurate return on time and set up a payment plan if needed than to not file. The Failure to File Penalty is generally 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty generally will not exceed 25% of unpaid taxes. The Failure to Pay Penalty is generally 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty will not exceed 25% of unpaid taxes.

      • If a person’s failure to file is deemed fraudulent, the penalty generally increases from 5 percent per month to 15 percent for each month or part of a month the return is late, with the maximum penalty generally increasing from 25 percent to 75 percent.

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