IRS Targeting Taxpayers Who Failed to File Tax Returns
By Michael Murray, North Carolina Tax Controversy Attorney
For those who failed to file tax returns, the IRS may be reaching out to you soon. Due to new and improved technology and processes, the IRS is actively focusing on taxpayers who have not filed their return(s). This is an increased effort by the IRS to compel compliance and enforce tax laws. The ultimate goal is to generate more revenue by discovering money owed by non-filers.
The IRS is using the following systems to detect noncompliance and force taxpayers to file past returns and pay outstanding liabilities:
Automated Substitute for Return (ASFR) Program
The automated substitute for return unit is a division of the IRS that enforces the requirement to file tax returns. If you do not file a return as required, the employees working in this division will file a substitute for return (SFR) for you based on information available. You can still file your tax return to replace the SFR, and you will want to do so if you can gain any advantage by changing your filing status and/or applying any exemptions or credits you may be entitled to.
When the IRS notices that a person has not filed for a few years, yet has income documents on file such as W-2 and 1099 forms, then the ASFR unit prepares and files the substitute returns based on the information on those tax documents. They will do this for all unfiled years. If you failed to file tax returns, the IRS is likely to catch up to you with ASFR.
Automated 6020(b) Process
In recent years, businesses that failed to file employment tax returns got away with billions of dollars in unpaid taxes because the IRS redirected its staff to other priorities due to limited resources. When a taxpayer fails to file a tax return, the IRS is authorized under Section 6020(b) of the Tax Code to determine and assess a tax liability. For some businesses with missing employment tax returns, the IRS can prepare its own substitute return for them using what is known as the Automated 6020(b) program. The IRS plans to allocate more resources to the program in the coming years to potentially discover a goldmine of back taxes owed.
Another new procedure you should be aware of is the Delinquent Return Refund Hold (DRRH) program. The IRS will keep your tax refunds if you have unpaid tax debt. The new DRRH program also allows them to hold any refunds if you have an unfiled return within the five years surrounding that refund. So, if you have any unfiled returns in the last five years and you are expecting a refund this year, the IRS may hold it until you file that return and pay any tax debt on it.
As part of this initiative to compel compliance among non-filers, the IRS is currently hiring additional enforcement personnel and will use them to increase the frequency of in-person visits with high-income non-filers. An IRS revenue officer may come to your door (wearing a mask throughout the pandemic, of course) regarding your past tax returns.
If you failed to file taxes and need assistance in getting back on track with the IRS or NCDOR, contact the experienced tax attorneys at Murray Moyer, PLLC for more information. Do not wait for the IRS to knock on your door before you address your unfiled tax returns or unpaid tax debt. If you are a high-income taxpayer with unfiled returns, you should consult with Murray Moyer, PLLC as soon as possible. Schedule an appointment today if you failed to file tax returns and we will discuss your unfiled returns and unpaid taxes so we can help you find the best way of addressing those debts.