On May 29, 2020, the Treasury Inspector General for Tax Administration (TIGTA) issued an audit report titled “High-Income Nonfilers Owing Billions of Dollars Are Not Being Worked by the Internal Revenue Service”. The report focused on high-income nonfilers and the IRS’ nonfiler strategy.
For tax years 2014 through 2016, there were 879,415 high-income nonfilers with an estimated tax due of $45.7 billion. From this group, more than one-third of cases have not been selected by the IRS for an assessment. The report indicated that the IRS has experienced decreased resources, which is likely a contributing factor in untouched cases.
The TIGTA audit report issued seven recommendations that the IRS has agreed, partially agreed, or disagreed to:
- Prioritize non-filers to ensure delinquency notices are issued to all high-income nonfilers.
- Implement controls to ensure that high-income nonfilers are not shelved.
- Partial Agreement
- Reallocate resources to ensure that most, if not all, high-income nonfilers are subject to enforcement action.
- Analyze the population of high-income nonfilers for tax years 2014-2016 and issue notices.
- Reconsider working multiple tax year cases for all high-income nonfilers.
- Implement controls that will assist to identify and prioritize high-income nonfilers who are repeat offenders.
- Designate a senior management official with appropriate resources and specific non-filer duties to address nonfiling, including high-income taxpayers and repeat nonfilers.
In response to the TIGTA report, a spokesperson for the IRS announced that their Global High Wealth Industry Group (a specialized group within the Large Business and International Division) will initiate several hundred return examinations of high-income individuals, starting between July 15 and September 30 of 2020.
The Global High Wealth group analyzes the whole financial picture of high-income individuals. The examination process includes not only the taxpayer’s individual return but also any related pass-through entities with a heightened focus on partnerships.
When examining the pass-through returns, there will be an emphasis on ensuring the taxpayer is in compliance with the new tax laws of the 2017 tax reform legislation known as the Tax Cuts and Jobs Act. Additionally, there will be a renewed focus on the examinations of private foundations.
For additional insight or for assistance contact our tax professionals.
By Trista Acker, CPA, CFP, NSSA (Dublin office)