IRS to Focus on High-Income Earners in 2024
IRS Commissioner, Danny Werfel, indicated in recent interviews that the Internal Revenue Service will start to focus its collection efforts on high-income earners. The IRS admits that the recent drop in enforcement action is due to Covid-19 and decrease in funding, which resulted in discrepancies between returns that were filed by high income earners and the collection potential for the agency. In 2023, there was an additional IRS budget increase. The IRS decided to use this additional funding to increase staff, technology and concentrate their collection efforts on high-income earners.
What does this mean for taxpayers?
If a taxpayer’s income is over $400,000, they may have more likelihood of being audited or the IRS increasing collection enforcement. Taxpayers should make sure that they are up to date with their Federal and/or state filing(s) and payment compliance. As the IRS begins this process of increased scrutiny, taxpayers may begin to experience the following IRS actions:
- Increase in IRS audits.
- Collection enforcement.
- Notices that request unfiled returns as part of a new non-filer initiative.
- Preparation of unfiled returns, “Substitute for Return” by the IRS.
The IRS will begin to send out reminder notices that indicate that the taxpayer is out of compliance. The taxpayer should be aware if they receive a CP-59 notice. The IRS notices are set to go out to high-income earners soon. If the taxpayer receives this type of notice, they should consult with a tax professional quickly to discuss.
How can a tax practitioner help?
Tax professionals are knowledgeable regarding tax rules and regulations and can assist in the following ways:
- Assistance with tax compliance review. This can include contacting IRS and state tax authorities and determining the taxpayer’s current compliance standing.
- Tax preparation of unfiled returns. This may include evaluation of current income and expenses for tax planning.
- Representation of taxpayers with the IRS and state tax authorities with potential audits and collection enforcement.
Overall, high-income earners and large corporations should be vigilant with their tax obligations and ensure that they review their current tax compliance. If the taxpayer receives a notice or determines that they are not in compliance, they should determine the best steps to become compliant to get back on track with the IRS. Taxpayers with compliance issues may want to seek out a tax professional who can help. The Hoffman & Associates tax team would be happy to assist.
