Introduction: In its ongoing mission to enhance tax compliance and equity, the Internal Revenue Service (IRS) recently unveiled a significant initiative on February 29th. This effort is squarely aimed at high-income taxpayers who have neglected to file their federal income tax returns. With over 125,000 instances of non-filing identified since 2017, the IRS is taking proactive steps to address this issue.
The Initiative: This new undertaking, funded by the Inflation Reduction Act, commences with the dispatch of IRS compliance letters this week. These letters are being sent to more than 25,000 individuals with incomes exceeding $1 million and over 100,000 individuals with incomes ranging from $400,000 to $1 million for the tax years spanning 2017 to 2021. It is anticipated that 20,000 to 40,000 CP-59 Notices will be issued weekly, initially targeting taxpayers in the highest income brackets.
Understanding the CP 59 Notice: The CP-59 notice, recently updated, is dispatched when the IRS lacks records of prior personal tax returns being filed. It outlines the steps taxpayers can take to rectify their non-filing status:
File their signed, personal tax return promptly or provide reasons for not filing.
Complete Form 15103, Form 1040 Return Delinquency, included with the notice to clarify reasons for filing late or why filing isn't necessary.
Detach the notice stub and mail it with the tax return and completed Form 15103 using the provided envelope. Alternatively, taxpayers can fax their information to the number provided, ensuring they understand the privacy and security policies of the fax service used.
Enhancements in the Updated CP 59 Notice: As part of the broader transformation within the IRS funded by the Inflation Reduction Act, the CP-59 notice has been revised to align with the recently announced Simple Notice Initiative. These enhancements aim to provide simplified, clear, and easily understandable information, along with more electronic options to assist taxpayers in fulfilling their tax obligations. Key improvements include:
Enhanced content emphasizing instructions on filing, obtaining transcripts, and payment options.
Integration of QR codes directing taxpayers to filing information and resolution options for balances.
Reduction in the number of pages to streamline communication.
Escalation of IRS Actions: Recipients of these letters are urged to take immediate action to avoid further follow-up notices, heightened penalties, and stronger enforcement measures. Additionally, failing to file past due tax returns promptly can lead to various consequences, including:
Accrual of interest and penalties.
Risk of losing refunds.
Impact on Social Security benefits.
Potential for IRS enforcement actions, including collection, audit, and criminal prosecution.
Tax Return and Collection Actions: For taxpayers who repeatedly fail to respond and file, the IRS may generate a substitute tax return based on reported income from employers, financial institutions, and other sources. However, this substitute return may not account for deductions and exemptions to which the taxpayer is entitled. Consequently, it's in the taxpayer's best interest to file their own return to maximize benefits.
Conclusion: The IRS's latest initiative targeting high-income non-filers underscores the agency's commitment to enhancing tax compliance and fairness. Taxpayers receiving CP-59 notices should act promptly to address their non-filing status and avoid potential consequences. By understanding the implications and taking proactive steps, taxpayers can ensure compliance with their tax obligations and mitigate any associated penalties or enforcement actions.
Why choose Mark Sullivan Consulting, PLLC? As high-income taxpayers navigate the complexities of addressing unfiled tax returns and potential IRS settlements, it's essential to seek expert guidance and support. Mark Sullivan Consulting stands ready to assist in this critical process. With years of specialized experience in federal tax controversy, audit, and appeals representation, as well as tax consulting and advisory services, Mark offers unparalleled expertise and dedication to client success.
By retaining Mark Sullivan Consulting, high-income taxpayers can benefit from personalized guidance tailored to their unique financial situations and tax challenges. From preparing unfiled tax returns to negotiating settlements with the IRS, Mark Sullivan Consulting provides comprehensive support every step of the way. With a commitment to integrity, transparency, and excellence in service, Mark Sullivan Consulting empowers clients to navigate IRS compliance initiatives with confidence and peace of mind.
About the author
Mark W. Sullivan, EA founded Sullivan Consulting in 1998 in St. Louis, MO and relocated to Scottsdale, AZ in 2020. He specializes in federal tax controversy representation, appeals and consulting on behalf of individuals, businesses, law, and accounting firms nationwide. In addition, he has served as the consulting and expert witness in numerous civil and criminal cases in multiple federal district courts.
Mark has an unlimited Enrolled Agents license and is admitted to practice before the Internal Revenue Service based on his extensive experience as a Revenue Officer in New York, NY, St. Louis, MO and Washington, D.C.
Copyright 2024 Mark Sullivan Consulting, PLLC.
Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.
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