Nonfilers Owe Billions to the IRS

While it may seem hard to believe, nearly 2 million people who didn’t file their taxes for tax years 2012 and 2013 owed about $7.4 billion to the IRS as of May 2016.

Fortunately for taxpayers, the IRS plants to change how it deals with people who don’t file their tax returns.  Accounting Today described a new report on the IRS’s strategy to deal with people who don’t comply with the tax laws.

The Treasury Inspector General for Tax Administration (TIGTA) issued the report.  It states that the IRS has a strategy in place to deal with taxpayers who meet the income threshold to file a tax return, but have not done so.  Typically, the IRS sends more than 640,000 notices a year to nonfilers with expired tax extensions.

Regrettably, most of the people who did not file their taxes in 2012 and 2013 will probably never be forced to do so.  The lack of notification traced back to a programming error on the IRS’s part.  The process of notification runs on a standalone process each year.

The IRS identified nonfilers with high incomes as a “high compliance risk” and made them a high-priority.  In fact, they are among the top eight areas in the annual work plan of the IRS.

Despite having changed its procedures for nonfilers in February 2014, as of July 2016, the IRS had not yet implemented any of its proposed initiatives.

The TIGA recommends that the IRS change its IT tools, procedures, and controls to ensure that it identifies more nonfilers.  The IRS agreed with these recommendations and plans to implement them.

One of the ways it will do so is by expanding its review of inventory volume and identifying document fluctuations in these counts for each tax year.  By doing so, the IRS expects to catch anomalies and address them.