IRS audits aren’t new and recent news is no exception. Due to an influx of funding from the Inflation Reduction Act (IRA), the federal tax agency has been cracking down on high-income and wealthy individuals who owe tax debt.
The compliance initiative targeting high-earning non-filers comes after an IRS warning for wealthy, high earners earlier this year. As Kiplinger reported, the IRS foretold increases in audits, levied penalties, and encouraged taxpayers to file their back taxes before the agency filed for them.
Now, six months later, the IRS has made good on its promise: expanded efforts to reclaim tax debts from high-earning, non-filing taxpayers are on the horizon.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Is the IRS cracking down on high-income earners?
If you earn between $400,000 and $1 million and still need to file a tax return, you may be chosen by the IRS for audit. The tax agency has found thus far:
- 1,600 individuals when the initiative began last fall
- An additional 125,000 non-filers in February
The agency also said it has prioritized individuals owing $250,000 or more in tax debt.
The IRS is looking as far back as 2017 for overdue taxes.
Before the IRA, the IRS cited underfunding and a lack of resources as reasons the agency couldn’t follow up on its initiative to pursue back taxes. Now billions in funding have made this compliance initiative a reality. The IRS reports that nearly 80% of the initially identified non-filers have now made a payment to the tax agency.
Will the IRS audit everyone? Last week, In a press conference in Austin Texas, the U.S. Treasury Department announced the launch of audits of “the 60 largest corporate taxpayers, with average assets of $24 billion.” The IRS will also audit “76 of the largest partnerships” and crack down on the “abuse of corporate jets for personal travel.”
This comes nearly 18 months after a rumor, spurred by some Congressional lawmakers, claimed that 87,000 IRS agents would be coming for your tax dollars. But, it turns out, only some of that is true. Instead of thousands of agents, only dozens are coming. And they’re prioritizing the wealthy and those with higher incomes.
How does the IRS find people who don’t pay taxes?
The agency received third-party information to isolate individuals owing tax debt. This includes documents like Forms W-2 and 1099. These IRS forms can indicate when there is reportable income but no corresponding taxpayer return.
Additionally, the IRS has assigned dozens of senior employees to track back tax cases to recoup lost revenue.
How do you pay back IRS taxes?
If you still need to file an old federal tax return, there is still time. The IRS has mailed out compliance alerts for failure to file a tax form, known as a CP59 notice.
If you’ve received a CP59 notice, you might want to consult a tax professional on filing back taxes. The IRS has provided resources on how to file a back return.
You can also make payments on past due returns via bank account, credit or debit card, and apply for a payment plan through the IRS website or your IRS online account.
You may want to ask a qualified and trusted tax professional about these options as well.
Related Content
- IRS Employees Owe $50 Million in Unpaid Taxes
- Red Flags for IRS Audit
- Audit Reveals IRS Has No Plan to Replace Old Tech
- Why Some States Won’t Get Direct File
-
Stock Market Today: Stocks Waver Near All-Time Highs Ahead of Fed Rate CutEquities were torn between discounting a quarter-point cut and a half-point cut to interest rates tomorrow.
-
Microsoft Hikes Dividend, Announces $60 Billion Stock BuybackMicrosoft The tech giant is returning even more cash to shareholders.
-
IRS Skirts TikTok Ban to Sniff Out Tax ScammersTax Scams Social media scams caused thousands to file inaccurate returns. What does that have to do with TikTok?
-
This Double-Dip Trust Benefit Really Is Too Good to Be TrueLet's clear up the confusion among some trust makers and taxpayers over how grantor trust status affects the step-up in basis and estate tax exclusion.
-
How to Structure Retirement Income to Tamp Down TaxesFrom Social Security to IRAs and investments, with smart tax planning, retirees can have some control over how much of their income they'll get to keep.
-
Is an Annuity Worth It? Tax Pros and ConsRetirement Knowing how an annuity might impact your tax situation can be confusing. Here are some advantages and downsides to consider.
-
Should You Keep Your 401(k) When You Retire?Here are three primary reasons you might want to consider moving your retirement money from your 401(k) to an IRA once you retire.
-
Want to Move to Italy? What to Consider FinanciallyOnce you've decided that you and Italy are compatible, you'll want to work out your tax planning, investments, retirement accounts and benefits.
-
Who Does the IRS Audit the Most?Audits The IRS has a $400K audit directive problem. Here’s what you need to know.
-
Saving to Be a 401(k) Millionaire? Plan for Taxes NowYour tax bite in retirement could be excruciating. Here's why super savers need to get serious about protecting themselves.
