Blair Bulletin

Over 125,000 High-Income Non-Filers Trigger IRS Scrutiny

March 2024


2024 03 01


Belated Action by the IRS…Seeking Hundreds of Millions of Dollars in Unpaid Taxes 

The IRS has identified more than 125,000 high-income American taxpayers who failed to file federal income tax returns since 2017. What’s taken the agency this long to act? Money! More than a decade of budget cuts constrained adequate IRS staffing to pursue compliance efforts that are estimated at over $1 billion of unreported revenue. Conservatively, the IRS estimates hundreds of millions of dollars of unpaid taxes are in play. 

IRS inaction was reversed as a result of funding provided by the Inflation Reduction Act. The IRS is now taking swift and aggressive action to make up for lost time by mailing compliance alerts for failure to file a tax return at the rate of 20,000 to 40,000 letters each week. These are all cases where the IRS has received third-party information – such as through Forms W-2 and 1099s – identifying people who received significant income and failed to file a tax return. The notification will come in the form of the IRS CP-59 Notice.


High-Income Non-Filers are Primary Targets 

Non-filers with the highest-income profiles are the target recipients who will be notified for failure to file between tax years 2017 and 2021. Specifically: 

• More than 25,000 to those with more than $1 million in income.
• Over 100,000 to people with incomes between $400,000 and $1 million.

Given the above, there is scant room for debate with IRS Commissioner Danny Werfel’s assessment of the scope of the problem and the IRS initiation of the solution. 

“At this time of year when millions of hard-working people are doing the right thing paying their taxes, we cannot tolerate those with higher incomes failing to do a basic civic duty of filing a tax return,” said IRS Commissioner Danny Werfel. “The IRS is taking this step to address this most basic form of non-compliance, which includes many who are engaged in tax evasion. This is one of the clearest examples of the need to have a properly funded IRS. With the Inflation Reduction Act resources, the agency finally has the funding to identify non-filers, ensure they meet this core civic responsibility, and ultimately help ensure fairness for everyone who plays by the rules.” 


Non-Filers Advised to Respond Promptly 

The IRS urges taxpayers who receive the CP-59 Notice letter to immediately file their late tax returns and pay delinquent tax, interest and penalties. It is wise for non-filers to consider consulting a trusted tax advisor to ensure accurate filing. Professional tax advice will lessen the likelihood of incurring significant financial consequences. The failure-to-file penalty amounts to 5% of the amount owed every month – up to 25% of the tax bill. Additional guidance is also available from the IRS … special non-filer information on

Note: The IRS is unaware of the potential credits and deductions late filers may have. Some may be owed a refund. 


Consequences of Failing to File 

In addition to incurring the failure-to-file penalty noted above, the IRS will escalate its efforts to successfully enforce compliance by people who don’t respond to the non-filer letter … via additional notices and other enforcement actions such as: 

• Initiate Collection process
• Conduct Audits
• Criminal prosecution
• File a Substitute for Return (SFR)


Substitute for Return (SFR)

Taxpayers who repeatedly do not comply with the IRS letter may expect the agency to generate a substitute return based on wages and other income reported by employers, financial institutions and other sources of taxpayer revenue receipts. Content of the SFR includes the delinquent tax, penalty and interest owed by the taxpayer. 

Before preparing the SFR, the IRS provides a 90 day “grace period” for the taxpayer to respond to the agency proposal to conduct a tax assessment or file a petition in Tax Court. In the absence of either of these actions by the taxpayer, the IRS will proceed with the proposed assessment. 

Note: The SFR typically will trigger a tax bill. If not paid the collection process will ensue which may include additional penalties and/or criminal prosecution. 



“If someone hasn’t filed a tax return for previous years, this is the time to review their situation and make it right,” IRS Commissioner Danny Werfel said. And when people don’t file their taxes, they need to know there’s a consequence, he added. For those who owe, the risk will just grow over time as will the potential for penalties and interest. These non-filers should review information on that can help and consider talking to a trusted tax professional as soon as possible.” 


The above presentation is meant as an overview only.  
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