If you are considered a high earner, this is not the year to play with your taxes. (Not that we ever recommend doing that!) The Internal Revenue Service is keeping the pressure on high income taxpayers who do not file their taxes as well as other high wealth taxpayers who may otherwise be hiding their earnings to avoid paying taxes. And while agents are actively pursuing these people, Darren Guillot, Commissioner of the IRS Small Business/Self-Employed – Collection division said the goal is to avoid as much as possible escalating a case to enforcement proceedings.
His message on November 15 to attendees of the AICPA & CIMA National and Sophisticated Tax Planning Conferences in Washington, D.C., was a simple one: “Just tell the truth. We want to get you in compliance. We want you to file on time and pay what you owe. Every case is not criminal. We don’t want any case to be criminal, or enforcement or a seizure.”
To that end, he highlighted some of the activities the agency is engaged in that target high income non-filers, which he defined as earning at least $100,000 in income from a third-party source. The agency is employing data analytics to identify these individuals and are engaging these taxpayers through what is called High Income Delinquent Filer (HiDeF) Sweeps, which began in December 2018.
The analytics identified those who meet the income threshold and had at least three years of unfiled returns. The agency then proceeded with unannounced field visits, though those were moved to a virtual environment because of the COVID-19 pandemic.
Guillot said these personal interactions with agents have been key in collection activities. “It sends a message,” he said. “We just want to hear from you. And you certainly are going to hear from us.”
He noted that in 2019, there were 9.5 million non-filers and of them, more than 843,000 were high income. He said the HiDeF program would be continuing for years to come. For those instances that involve egregious noncompliance and/or potential fraud, the IRS has what is called Operation Surround Sound, a collaboration beween the Office of Fraud Enforcement, Collection and Examination Operations.
These types of cases could involve significantly higher amounts of earned income, as well as foreign holdings and cryptocurrency. And again, Guillot reiterated the advice of “just tell the truth” about what is going on and get back into compliance before it has a chance to become an enforcement action that could entail measures such as levies, asset collections, repatriation of foreign assets and revocation or denial of passports.
Busting Ghost Employers
Guillot also highlighted another target the agency recently began focusing on: ghost employers. These involve employers who provide a W-2 to their employees but do not file the proper forms or pay the money owed to the IRS or the Social Security Administration.
Again, he pointed to the agency’s use of data analytics, which uncovered this scheme, and in a relatively short amount of time, revenue officers were able to help launch a number of criminal investigations.
Other areas the IRS is focused on include employers who fraudulently applied for COVID assistance to help keep their employees, stopping hundreds of millions of dollars in payments; tracking transactions of more than $10,000 in cash where no tax returns are filed; and efforts that are focusing on high income earners and under-reporting of income in gig economy segments.