Since receiving funding from the Inflation Reduction Act, the IRS has ramped up tax enforcement for millionaires, but data show the agency has yet to crack down on a separate set of wealthy non-filers. Lawmakers, including U.S. Senate Finance Committee Chair Ron Wyden (D-Ore.) want the agency to increase compliance efforts for high-income earners who aren't paying taxes.
“I urge the IRS to initiate enforcement actions against every single millionaire non-filer,” Wyden wrote in a Sept. 28 letter to IRS Commissioner Danny Werfel. In the letter, Wyden refers to these non-filers as "wealthy tax cheats."
The Chairman also urged the IRS to “utilize the enforcement tools available to it for instances of willful millionaire non-filers.” These tools, according to Wyden, include referrals to the U.S. Department of Justice (DOJ) for civil or criminal prosecution, liens, and levies.
Wealthy tax cheats owe $65.7 billion
IRS data from 2017 to 2020 reveal that 1.4 million wealthy individuals failed to file federal tax returns. These unfiled returns are tied to an estimated $65.7 billion in unpaid taxes. In his letter, Wyden reminds the IRS that willful non-filing is a federal crime, adding that millionaires “know better,” given the tax professionals and advisors the wealthy have access to.
Data also show that many of these non-filing millionaires aren’t one-time offenders. For example, 10,272 of the millionaires identified failed to file more than one year of required tax returns.
So, what is the IRS doing about wealthy nonfilers? Not enough, according to Wyden, though the Senator commended the IRS for tax compliance the agency has achieved to date.
Wyden billionaire income tax investigation
Wyden’s tax compliance investigation revealed that only a small percentage of millionaire non-filers have been subject to the IRS’ strongest enforcement tools.
- Only 31 of the more than 10,000 millionaires who failed to file tax returns for multiple years were under criminal investigation this year.
- About 154 repeat millionaire offenders were criminally investigated in the past.
- The investigation identified 8,729 multi-millionaire non-filers, each with the potential for $500,000 in unpaid taxes.
- Of the wealthiest non-filers (2,000 taxpayers), only two were criminally investigated, and just 58 were subjected to liens and levies.
Will the IRS investigate more millionaires?
The IRS has already been successful in collecting $38 million from high-income individuals. As Kiplinger previously reported, the agency isn’t done going after what it refers to as millionaire tax evaders. The IRS currently has a list of 1,600 millionaires and 575 businesses it’s looking into.
Will Wyden’s concerns prompt the agency to add more wealthy “taxpayers” to that list? It seems likely, given the IRS’ intensified efforts to improve tax compliance, reduce the tax gap, and restore fairness to the US tax system.
Katelyn has more than 6 years’ experience working in tax and finance. While she specializes in tax content, Katelyn has also written for digital publications on topics including insurance, retirement and financial planning and has had financial advice commissioned by national print publications. She believes that knowledge is the key to success and enjoys helping others reach their goals by providing content that educates and informs.
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