Currently, there are more than 10 million taxpayers who haven’t filed their tax returns (known as non-filers) in the United States. Thanks to a budget increase, the IRS is prepared to ramp up its enforcement of the collection process targeting non-filers. The agency newly hired 10,000 agents last year and is planning to hire another 5,000 this year.
With its larger staff, the IRS planned to significantly increase in-person visits to notify non-filers of their obligations and to promote compliance. Although the emergence of COVID-19 put a halt to most collection activities, including planned visits, the IRS will resume its focus on non-filers following the July 15 deadline.
In spite of the pandemic, the IRS has continuously investigated people who haven’t filed tax returns in order to increase compliance and enforce the law. Pursuing non-filers is one of the IRS’s most efficient enforcement strategies because issuing non-filer notices can be a cost-effective tool that requires little more than automated notices. For that reason, I don’t advise waiting until the tax deadline hits in July, because that’s when the IRS collection activities will surge.
So how does the IRS go about finding non-filers? Currently, it uses various new technologies, including new research, data analytics, and compliance strategies to improve or replace existing systems. It employs technologically advanced tools, referred to as taxpayer noncompliance indicators, and assembles the data into graphs to visualize and understand the relationship between tax entities, including businesses, individuals, tax return preparers, and more. These tools aid in efficiently pinpointing indicators of taxpayer noncompliance and investigating non-filers.
Recently, the IRS implemented some major new programs. First, the Automated Substitute for Return Program (ASFR) allows the government agency to notify individual taxpayers of a potential liability they might be responsible for, where the liability amount is calculated based on their income statement information. Second, the Automated 6020(b) process identifies business taxpayers with employed tax requirements that have unfiled tax returns for a specific period. Third, the Delinquent Return Refund Hold program (DRRH) allows the IRS to hold back individual taxpayers’ income tax returns if the taxpayers have unfiled tax returns within five years. These programs allow the IRS to rapidly increase identification and case creation of individual or business non-filers and ultimately encourage non-filers to reach compliance on their own.
Despite the advanced courses of action that the IRS has taken to track and investigate millions of non-filers, there is another reason for individuals to resolve their delinquent tax problems: The IRS actually owes refunds to numerous non-filers. More than 1 million households that haven’t filed tax returns in the last three years are eligible for refunds. However, the July 15, 2020 deadline to receive refunds on 2016 tax returns has already passed.
I encourage taxpayers to file delinquent tax returns before the deadline. IRS agents will actively pursue collection activities and investigating non-filers. If you wait until after the deadline, your eligibility for a possible refund from the IRS may be gone.
In a later article, I will discuss how to come to tax compliance and different ways to solve tax debt problems.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
James Cha is a Certified Tax Resolution Specialist at Ace Plus Tax Resolution, providing solutions to Americans with IRS and state tax problems.
If you have any questions, contact us at James@AcePlusTaxResolution.com. If you or someone you know needs help with tax debt problems, call us at (213) 600-7388 or visit our website at https://AcePlusTaxResolution.com/.
