By David Lawder
WASHINGTON (Reuters) -The Internal Revenue Service said on Thursday it will crack down on high-income earners who have failed to file tax returns in 125,000 cases since 2017, resurrecting a non-filer enforcement program that was idled for years by past budget cuts.
The IRS said that the $80 billion in funding over a decade from the 2022 Inflation Reduction Act has enabled it to hire sufficient staff to resume the mailing of non-filing notices to these individuals, including 25,000 with apparent annual income above $1 million.
Another 100,000 of the targeted missing returns indicated income between $400,000 and $1 million, based on third party documents including W-2 and 1099 income reports.
IRS Commissioner Danny Werfel said the total "financial activity" associated with the unfiled returns tops $100 billion, and unpaid tax liabilities could easily run into the hundreds of millions of dollars.
"With Inflation Reduction Act resources, the agency finally has the funding to pursue this core responsibility and ensure fairness for everyone who played by the rules," Werfel said.
Werfel said notices will later go to non-filers with apparent income less than $400,000 but said the agency will keep its pledge not to increase audit rates on this group. The emphasis on this group will be to "help them" file their taxes and to take advantage of tax breaks they may be eligible such as the Child Tax Credit and the Earned Income Tax Credit for low-wage earners.
BUDGET CUTS
The non-filer enforcement program has operated only sporadically since 2016 because of staff reductions prompted by more than a decade of budget cuts passed by Republicans in Congress, Werfel said. The agency needed to have sufficient staff to pursue collections of delinquent tax debts related to the notices.
It has hired up to 7,000 new customer service staff, account managers and collections staff and implemented new automation technology since the IRA funding was passed in 2022, enabling it to pursue high-income non-filers. The agency said will mail out about 20,000 to 40,000 notices each week.
The IRS is eager to show that the supplemental $80 billion is yielding tangible results as Republicans in Congress continually seek to claw back the funds, including a $20 billion reduction as part of a top-line spending deal for fiscal 2024. As it executes this year's tax filing season, it said that taxpayer phone waits falling, and it recently tallied collections of nearly $500 million from 1,600 non-filing "millionaires."
A new report from the Congressional Budget Office shows that rescinding $20 billion of the Inflation Reduction Act funds would reduce federal revenues by $44 billion over 10 years, adding $24 billion to the U.S. budget deficit over the period.