IRS Issuing Compliance Letters to 100K Americans Thanks to Biden's Inflation Reduction Act

The Internal Revenue Service (IRS) is initiating the distribution of over 125,000 compliance letters to individuals identified as delinquent in tax payments, a move funded by allocations from the Inflation Reduction Act, as outlined in an IRS press release.

These CP59 notices, signaling a failure to file, pertain to tax years spanning from 2017 through 2021.

Among these, approximately 25,000 letters are designated for individuals with incomes surpassing $1 million who failed to file tax returns, while over 100,000 letters are slated for those with incomes ranging from $400,000 to $1 million who similarly neglected their tax obligations.

Notably, due to potential duplications in recipients, the total number of letters is expected to exceed the count of individuals targeted for compliance.

The IRS identified these non-filers through comprehensive scrutiny of third-party data such as W-2 and 1099 forms, cross-referencing income information with tax filings.

While the IRS anticipates substantial tax revenue recovery from this effort, the exact amount remains uncertain, given the diverse tax credits and deductions that may apply. Nevertheless, the financial transactions flagged in these letters collectively surpass $100 billion.

According to the release, the IRS is intensifying efforts to pursue outstanding tax debts among high-income earners, having already recouped close to $500 million by targeting 1,600 millionaires, with ongoing endeavors in this realm.

Employing artificial intelligence, the IRS is conducting investigations into 75 of the nation's largest partnerships to enhance enforcement measures.

IRS Commissioner Danny Werfel emphasized the importance of upholding tax obligations, particularly among higher-income individuals, stating, "The IRS is taking this step to address this most basic form of non-compliance, which includes many who are engaged in tax evasion."

David Kass, Executive Director of Americans for Tax Fairness, echoed this sentiment, remarking, "It’s ridiculous that thousands of wealthy people don’t even bother to file a tax return," underscoring the significance of IRS enforcement actions in ensuring tax equity.

In response to non-compliance, the IRS has augmented its workforce by approximately 5,700 employees within the past year, aiming to bolster enforcement efforts, as reported by Reuters, citing an unnamed Treasury Department official.