Democrats press IRS over report that it failed to audit high-income non-filers

Democrats on the Senate Finance Committee are pressing the IRS about a watchdog’s finding that the agency did not address hundreds of thousands of high-income people who failed to file tax returns.

In a letter to IRS Commissioner Charles Rettig, the senators said that the report “spotlights an array of examples where the IRS either came up short in its enforcement efforts regarding the highest-earning tax dodgers, or did not even make the effort to pursue them.”

The IRS defines high-income non-filers as those with income of at least $100,000 who fail to file a tax return.

The Treasury Inspector General for Tax Administration (TIGTA) released a report earlier this month that found that there were nearly 880,000 high-income non-filers in tax years 2014 through 2016 who had an estimated tax due of $45.7 billion. The agency’s compliance personnel never worked on many of these cases.

The Finance Committee Democrats highlighted several findings in the report that they found troubling, including that the IRS never opened investigations into more than 300,000 of the non-filers, that the agency shelved about 37,000 cases and that the agency didn’t prioritize auditing non-filers who didn’t file tax returns in multiple years.

“We have raised concerns with you in the past about declining audit rates on high income individuals and corporations,” the senators wrote. “The TIGTA report establishes a pattern of IRS failing to enforce the nation’s tax laws for the biggest rule breakers.”

The senators asked the IRS for information about why the agency did not fully audit the non-filers; what significant changes, if any, the IRS has made to increase collections from high-income non-filers for tax years after 2016; what resources the IRS needs to complete audits of high-income non-filers; and why the IRS disagreed with a recommendation from TIGTA to designate a senior management official to address non-filers’ compliance with tax laws.

“Allowing nearly 900,000 households to skirt their filing obligations is an affront to basic fairness for the 150 million taxpayers, many of them middle class, who complied with the law and filed their taxes,” the senators wrote. “As we are sure you can appreciate, if enough taxpayers perceive the enforcement of our tax system to be either capricious or unjust, our long-successful system of voluntary tax compliance will unravel.”

Twelve Democrats on the Finance Committee signed the letter, including the panel’s ranking member, Sen. Ron Wyden (D-Ore.).

There has been bipartisan concern about the findings in the TIGTA report. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and House Ways and Means Committee Chairman Richard Neal (D-Mass.) have each written their own letters to the Trump administration about the report.

The IRS said in a response included in TIGTA’s report that it has increased resources dedicated to non-filers since fiscal 2018, and this year launched an initiative to conduct in-person visits with high-income non-filers. The agency said that it has a steering committee that oversees the performance of its non-filer program, and that it would consider appointing a single committee chairperson.