IRS cheated out of tens of billions of dollars by high-income non-filers, report finds
The tax agency has been combating a decline in staffing, resources
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A government watchdog group is warning that the IRS needs to do more to crack down on high-income taxpayers, many of whom are getting away with blatantly not filing tax returns or paying their obligations.
In a report from the Treasury Inspector General for Tax Administration titled “High-Income Nonfilers Owing Billions of Dollars Are Not Being Worked by the Internal Revenue Service," researchers identified more than 879,400 high-income nonfilers, with an estimated tax due of $45.7 billion, who did not satisfy filing requirements for tax years 2014 through 2016.
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Of those nonfilers, the IRS did not take action to collect from 369,180, who owed $20.8 billion. Another 42,000 cases were closed even though no work had been done on them. The other 510,235 likely will not be pursued due to a decline in resources, researchers said.
The top 100 high-income nonfilers for 2014 through 2016 that the IRS did not address had dues estimated at nearly $10 billion.
“High-income nonfilers are a small percentage of the nonfiler population; however, they reflect a higher noncompliance risk than other nonfilers and working these cases generates a greater return on investment,” researchers wrote. “Therefore, the IRS has an incentive to pursue high-income nonfiler cases.”
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In a statement included in the report, an official from the IRS said the agency remains committed to bringing high-income taxpayers into compliance.
“The issues TIGTA found in this audit are reflective of the resource challenges the IRS has faced in recent years,” the official said. “It will take time and additional resources to restore our enforcement levels to ensure we have a strong, visible and robust tax enforcement presence.”
A spokesperson declined to give further comment.
The IRS has been combating both a decline in staffing and a decline in resources. In the collection group, specifically, there was a 19 percent decline in workers between fiscal 2013 and fiscal 2018. It has lost half of its revenue offices, the agency said, and about one-third of its overall workforce over the past decade.
Funding as of fiscal 2018 was $11.4 billion, down from $12.15 billion in 2010.
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According to the report, the tax gap for tax years 2011 through 2013 was $441 billion, and $39 billion, or 9 percent, of which was attributable to blatant non-filing.
Intentional failure to file is a federal crime and can result in penalties.