Frost Law
The Internal Revenue Service (“IRS”) announced on February 29, 2024, that it is going to launch a new effort at seeking tax returns from wealthy Americans who have failed to file their taxes.1 The IRS claims that more than $100 billion in financial activity has gone unreported by taxpayers. The news comes on the heels of IRS Commissioner Daniel Warfel’s Ways and Means Committee hearing where he indicated new enforcement actions would be taken to make sure the wealthiest Americans are paying their fair share of taxes.2
The IRS has stated that it will be sending out compliance letters in more than 125,000 cases. These cases go back as far as 2017. By the IRS’s estimates, it will be sending letters in more than 25,000 cases involving individuals with income above $1 million and over 100,000 letters to people earning between $400,000 and $1 million. The IRS received the wage information through W-2s and 1099s that were reported to the IRS by third parties. These individuals will be receiving CP-59 Notices that will request the filing of accurate tax returns for the reported periods. The IRS says they expect to mail between 20,000 and 40,000 notices per week.
Taxpayers who fail to file a tax return after receiving the notice risk the IRS issuing a substitute for return (“SFR”). An SFR is a return prepared by the IRS that only takes into account information reported by third parties. In most cases, an SFR is going to result in the taxpayer owing a lot more taxes than they otherwise would. Since the IRS does not know which credits or deductions the taxpayer would qualify for, the tax bill calculated by the IRS is generally higher than would be determined on a return filed by the taxpayer. Additionally, the IRS will add interest and penalties to the balance it calculates. This generally includes a 5% failure to file penalty for every month the return is late, up to 25% of the overall tax bill.
Targeted taxpayers should contact a trusted tax advisor immediately to come into compliance with the IRS. A return prepared and filed by the taxpayer should be able to take advantage of credits and deductions that the taxpayer is entitled to. Additionally, by filing a return and making proper payment to the IRS, the taxpayer may avoid further penalties and collection action. The IRS in its news release signaled that it will be taking lien and levy actions against taxpayers who fail to respond to its notices. Moreover, it is possible that after filing a tax return the taxpayer will determine that they are owed a refund. Therefore, taxpayers are encouraged to take immediate action and contact a reputable tax professional should they receive these notices from the IRS.
The attorneys at Frost Law have years of experience representing taxpayers in tax controversy matters. If you need assistance, please don't hesitate to reach out to us at (410) 497-5947 or schedule a confidential consultation.
The Internal Revenue Service (“IRS”) announced on February 29, 2024, that it is going to launch a new effort at seeking tax returns from wealthy Americans who have failed to file their taxes.1 The IRS claims that more than $100 billion in financial activity has gone unreported by taxpayers. The news comes on the heels of IRS Commissioner Daniel Warfel’s Ways and Means Committee hearing where he indicated new enforcement actions would be taken to make sure the wealthiest Americans are paying their fair share of taxes.2
The IRS has stated that it will be sending out compliance letters in more than 125,000 cases. These cases go back as far as 2017. By the IRS’s estimates, it will be sending letters in more than 25,000 cases involving individuals with income above $1 million and over 100,000 letters to people earning between $400,000 and $1 million. The IRS received the wage information through W-2s and 1099s that were reported to the IRS by third parties. These individuals will be receiving CP-59 Notices that will request the filing of accurate tax returns for the reported periods. The IRS says they expect to mail between 20,000 and 40,000 notices per week.
Taxpayers who fail to file a tax return after receiving the notice risk the IRS issuing a substitute for return (“SFR”). An SFR is a return prepared by the IRS that only takes into account information reported by third parties. In most cases, an SFR is going to result in the taxpayer owing a lot more taxes than they otherwise would. Since the IRS does not know which credits or deductions the taxpayer would qualify for, the tax bill calculated by the IRS is generally higher than would be determined on a return filed by the taxpayer. Additionally, the IRS will add interest and penalties to the balance it calculates. This generally includes a 5% failure to file penalty for every month the return is late, up to 25% of the overall tax bill.
Targeted taxpayers should contact a trusted tax advisor immediately to come into compliance with the IRS. A return prepared and filed by the taxpayer should be able to take advantage of credits and deductions that the taxpayer is entitled to. Additionally, by filing a return and making proper payment to the IRS, the taxpayer may avoid further penalties and collection action. The IRS in its news release signaled that it will be taking lien and levy actions against taxpayers who fail to respond to its notices. Moreover, it is possible that after filing a tax return the taxpayer will determine that they are owed a refund. Therefore, taxpayers are encouraged to take immediate action and contact a reputable tax professional should they receive these notices from the IRS.
The attorneys at Frost Law have years of experience representing taxpayers in tax controversy matters. If you need assistance, please don't hesitate to reach out to us at (410) 497-5947 or schedule a confidential consultation.
