Wealthy Americans ignore IRS filing rules and evade taxes
- The IRS is targeting high-income non-filers who have not filed tax returns since 2017.
- Only a small percentage of non-filers are complying, despite the increased IRS scrutiny.
- The agency faces challenges with limited resources and legal constraints, allowing many non-filing wealthy individuals to escape significant penalties.
In early 2024, the Internal Revenue Service (IRS) initiated a campaign aimed at high-income non-filers, particularly those who have not submitted tax returns since 2017. Operating under budget and staffing limitations, the IRS identified approximately 25,000 individuals with suspected incomes above $1 million who had failed to file. Despite the IRS's efforts—the mailing of 125,000 investigation notices—only a small portion of offenders complied with filing, leading to an increase in the number of returns from 21,000 to 26,000 in three months, ultimately generating $292 million in additional tax revenue. As of August 2024, it was reported that only 5,460 among the highest earners had filed. The challenge lies in the legal consequences of non-filing. Under federal law, failing to file a tax return is categorized as a misdemeanor, whereas filing False returns can result in felony charges. This legal framework often incentivizes the wealthiest individuals to remain non-compliant, as the fear of prosecution is significantly lower. A deeper look into the statistics provided by the IRS reveals troubling trends. Of the nearly 2,000 chronic non-filers with over $5 million in annual income, only 551 had managed to file returns over a ten-month span. The IRS's criminal investigation unit had 62 open cases involving these non-filers as of late October 2024, emphasizing the struggles faced by the agency in pursuing wealthy tax evaders. The broader implications of this issue reflect longstanding systemic problems within the IRS, which has seen its resources strained due to budget cuts. The agency has vocalized its intention to broaden its enforcement measures and pressure wealthy individuals to comply with federal tax laws. However, the outcomes illustrate the significant hurdles posed by resource limitations and the incentive structures embedded within existing tax laws. Thus, many affluent citizens may continue to dodge their tax obligations without facing serious repercussions despite the IRS's renewed efforts.