The IRS announced on Thursday that it is reinstating its non-filer enforcement program, targeting high-income individuals who haven’t filed tax returns. This initiative, dormant for several years due to budget cuts, has been revived thanks to the $80 billion funding from the 2022 Inflation Reduction Act. The program will initially focus on 125,000 cases dating back to 2017, including 25,000 individuals with annual incomes over $1 million and another 100,000 with incomes between $400,000 and $1 million. These figures are based on third-party documents like W-2s and 1099s.
IRS Commissioner Danny Werfel highlighted the significance of the non-filed returns, which account for over $100 billion in financial activity and potentially hundreds of millions in unpaid taxes. The Inflation Reduction Act’s resources enable the IRS to enforce tax compliance more effectively, ensuring fairness for those who have adhered to tax laws.
Notices will also be sent to non-filers earning less than $400,000, but the IRS aims to assist this group in filing their taxes and claiming eligible tax benefits such as the Child Tax Credit and the Earned Income Tax Credit.
The revival of this program comes after years of operational limitations due to budget cuts implemented by Congress. These cuts led to significant staff reductions, hindering the IRS’s ability to pursue delinquent tax debts. However, with the recent hiring of up to 7,000 new staff and the adoption of new automation technology, the IRS is now equipped to target high-income non-filers, planning to send out 20,000 to 40,000 notices weekly.
Amidst ongoing efforts by Republicans in Congress to reduce the Inflation Reduction Act’s funding, including a proposed $20 billion cut for fiscal 2024, the IRS is keen to demonstrate the effectiveness of the additional funding. This includes improved customer service, reduced phone wait times, and significant tax collections from non-filing high earners. A Congressional Budget Office report indicates that cutting $20 billion from the IRA would lead to a $44 billion decrease in federal revenues over ten years, worsening the U.S. budget deficit by $24 billion in the same period.
