In a press release issued yesterday, the Service announced that it was beginning a, “new effort today focused on high-income taxpayers who have failed to file federal income tax returns in more than 125,000 instances since 2017.” This is something that they are calling a, “New Initiative.”
Please pardon me for being bold enough to ask a question. Isn’t this what these fine ladies and gentlemen were supposed to be doing all along?
According to the Service, their non-filers program has only run sporadically since 2016, given budget shortfalls and a lack of staffing. But with the new budget money from the Inflation Reduction Act, they’re going to rev it back up again.
These are cases where the IRS has received third-party notification of income such as W-2’s and 1099’s where they know that individuals have earned in excess of $400K. Supposedly there are 25K cases with income over $1M and another 100K cases with income between $400K and $1M.
If I were to guess, I’d presume those numbers to be extremely conservative.
So let’s say that you are one of these people. You have a $200K W-2 and a 1099 from your investments with another $100K in income. In addition, your business has over $1M in 1099’s during the year. For whatever reason, whether it’s sickness, divorce, or whatever, you haven’t filed your return.
Exactly what can the IRS do? We’ve handled hundreds of these cases in the last 34 years and have a proven track record in being able to solve these problems. The question becomes, what can happen?
1 – Don’t Panic
The chances are high that no one’s going to jail. While they can incarcerate you for this offense, unless you’re a celebrity or a politician, the chances of this happening are somewhere between slim and nil.
The IRS is a collection agency. They’re in the business of collecting money so that our elected officials can find new and exotic ways to waste it. If you’re in the slammer, you probably won’t be able to pay them. They want your money, not your freedom.
2 – They Can’t Collect A Dime Before Establishing A Number
The IRS can’t levy your account, if they don’t know how much you owe. If you haven’t filed a return, then no number has been established for them to collect.
At this point, you’re nothing more than a compliance problem where they’ll send letters and maybe knock on your door. If you continue in not filing a return, in order to establish a collection number, the Service will complete a return on your behalf.
They’ll take the W-2’s, 1099’s, and K-1’s that they’ve received on your behalf, total up the income, and complete a return without any deductions that includes interest and penalty. They will then send you a copy of the return and ask for your help.
If you agree with the bill, they’ll ask you to pay. If you disagree, as well you should given the lack of deductions, they’ll give you 45 days to submit your own, properly completed return. If you don’t file one, they now have established the number they needed in order to begin collection.
3 – Liens And Levies
Now that they have a number to collect, they can place a lien against your assets. You’ll receive notification of the lien in the mail. If you do not reply, at that point they’ll levy your checking accounts to extract the money.
Let me leave you with this.
As mentioned before, we’ve handled hundreds of these cases over the years and have formulated a specific strategy for their successful completion. The main thing to understand is that time is not your friend.
The further these go along, the less anyone can do to help you.
There are dozens of “Tax Relief Wizards” that we all see advertising on late night insomniac theater. They make fantastical claims that seem too good to be true.
And they are. There are no new programs for tax relief. None. They simply don’t exist.
These Wizards want to get you signed up for a monthly program where they take between $300 – $400 out of your checking account each month, while doing little if nothing to solve your problem. P.T. Barnum taught us that there’s a sucker born every minute, and two born to take them. Be smart enough to not fall into this trap.
Please understand that the IRS thinks in terms of forever. If they don’t collect from you now, they’ll wait until you die and collect from your estate. I’ve seen family homes that should have gone to an entrepreneur’s children sold to pay off liens from unfiled tax returns.
The time to act is now. Again, if you wait too long on these, there’s little or nothing that anyone can do to help. Please call us today to get the help you need.
If you have a loved one or a friend in this position, please forward this column and ask them to contact us. Believe me. The IRS isn’t going to go away.
We’re all going to get through this. Let’s get through it together.
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Sincerely yours,
Chris Amundson
President
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