Personal finance

These high-income taxpayers are getting a visit from the IRS

Getty Images

The IRS will soon start make house calls to high-income individuals who didn’t submit a tax return.

Starting this month, the agency will send its revenue officers to visit people with income in excess of $100,000 and who failed to file Form 1040 in 2018 or in previous years.

“These visits shouldn’t come as a surprise to the taxpayer because the IRS has contacted these individuals multiple times regarding their tax issues prior to their cases being assigned to an IRS revenue officer,” said Hank Kea, director of field collection operations, small business/self-employed division, at the federal agency.

Kea discussed the new measures on a phone call with reporters on Wednesday.

So far, the IRS anticipates making about 800 in-person visits to these high-income non-filers in the first two months, he said. Thousands more will follow through the year. The agency anticipates sending additional revenue officers out as it identifies more cases of noncompliance.

“When you look at the tax gap, there’s a significant amount of revenue lost to individual high-income non-filers, and it literally does measure into the billions,” Kea said.

The visits are taking place at a time when taxpayers enjoy reduced odds of an audit by the IRS. During the fiscal year 2019, only 0.45% of taxpayers were audited.

Third-party data

Nick M Do | Getty Images

The IRS can sniff out unreported income and earnings through third-party reporting sources, including your employer, your bank or brokerage, and small businesses that pay you.

When those entities detail your wages on your Form W-2 or report payment on a Form 1099, a corresponding report goes out to the taxman.

The IRS flags returns in which taxpayers’ returns fail to match those third-party reports.

By the time a revenue officer has been dispatched to your home or office, the IRS has already been in touch with you via snail mail several times to address your obligations.

“When clients of mine get a visit from the IRS, they get a little note posted to the door, saying to call this person at the IRS,” said Laurie Kazenoff, partner at law firm Moritt Hock & Hamroff LLP.

“In my mind, the visit serves two purposes,” she said. “It jolts the taxpayer into compliance and the second reason is to gain information about the taxpayer — see where the taxpayer lives and the vehicles they drive.

Bear in mind that the IRS doesn’t initiate contact with taxpayers through unsolicited calls or e-mails. Be wary if someone claiming to be from the IRS calls you out of the blue and demands payment; it’s probably a scammer.

File and pay on time

The Internal Revenue Services offices in Washington, D.C.

Adam Jeffery | CNBC

If you’re dreading filing your tax return because you have a large sum due, always take the first step of at least submitting your Form 1040.

The IRS tacks on steep penalties for those who fail to file.

In that case, you’re responsible for 5% of the unpaid taxes for each month or part of a month that the return is late.

While you can file for a six-month extension to submit your 2019 tax return, you have until April 15 to pay whatever sums you owe.

More from Smart Tax Planning:
What Trump’s tax overhaul extension plans mean for you
One in 5 fear they’ll owe the IRS money this spring
How to protect yourself from tax scams this season

The failure-to-pay penalty is equal to 0.5% of the taxes owed after the due date for each month or part of a month the liability goes unpaid.

In a dire situation, you could file your return on time and work out a payment plan with the IRS.

Options include a 120-day installment plan with no set-up fees; however, penalties and interest will accrue until you’re fully paid.

Products You May Like

Articles You May Like

Australian authorities take cluster approach to contain coronavirus
Unemployment benefits for gig and self-employed workers stalled by confusion, delays
Inherited an IRA? You can skip your distribution for 2020
Coronavirus: Lockdowns continue to suppress European pollution
SEC chair: We shouldn’t ban short selling — it’s needed for properly functioning market

Leave a Reply

Your email address will not be published. Required fields are marked *