The Treasury Inspector General for Tax Administration (TIGTA) released several reports this week, including one evaluating the Small Business/Self-Employed Division’s current approach to addressing cases involving non-filers.
The report indicated that the IRS reached a “historic high” in enforcement revenue in FY2024. At the same time, collection revenue increased from FY2023 to FY2025, partially offsetting declines in other enforcement categories.
The growth was largely attributable to the resumption of automated collection notices, including approximately 3.2 million notices sent to individual non-filers in FY2025.
Unlike many TIGTA reviews, this report was issued for informational purposes only and did not include recommendations.
Let me leave you with this…
The “Tax Gap,” which refers to taxpayers who don’t file their returns in a timely manner, was estimated at nearly $700B in 2025. Don’t kid yourselves, my Brothers and Sisters.
They’re coming.
Many might wonder how this ridiculously high balance of unreceived federal revenue is possible, so please understand the following example.
Consider a middle-aged worker who was just upsized, downsized or whatever-sized out of a job. They look for work for the following two years, and are unsuccessful.
So what do they do? They start a business.
They’ve always been a faithful taxpayer who normally received a refund, but their first year in business didn’t go quite as planned. Surprise…Surprise.
When it comes time to file their business tax return, they lack the necessary funds to complete it, so they let it go. The same scenario happens for the next couple of years.
Compliance issues are normally reviewed by the Service in three-year periods. This is because of the three year Federal Statute of Limitations on income tax audits.
This taxpayer’s file ends up on a Revenue Officer’s desk in year three, who must decide whether or not to pursue the individual. They look at the taxpayer’s history, see that they always received refunds, and decide not to waste time and resources working a case that will likely only result in a refund given the history.
This taxpayer is now an official member of the Tax Gap.
But welcome to 2026. Now things are different.
Given Artificial Intelligence, the IRS now has an automated system that pursues these non-filers.
I can’t tell you how many cases like this have walked into my office over the past 38 years. We actually had a client come in five years ago who hadn’t filed a return in 22 years.
Sooner or later an entrepreneur will need to file all of those returns. They’ll want to refinance a house, get some business funding, or do any of the other myriad of things that necessitate being in compliance.
And sooner is always better than later given the penalties that continue to accrue. This happens so often that we’ve developed a process that not only gets a client back into the good graces of the taxation agencies, but also avoids waking the sleeping dragon.
No one needs that dreaded knock on the door. If you find yourself in this situation, please contact us today.
S-Corp and Partnership Returns on extension are due next Tuesday, September 15th. If I’m still waiting on items to complete those returns, please send them in today.
There’s still time to complete the returns without incurring additional penalties.
And as always, if you’re having problems with your accounting and tax work, please contact us today.
We’re all going to get through this. Let’s get through it together..
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, Accounting and Tax Work, Tax Planning, or Tax Representation, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.AccountingSolutionsLtd.com
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