IRS initiative to bring nonfilers back into the system.

• Author: Voskuil, Richard C.

Background

The Internal Revenue Service has launched a nationwide initiative to address a major area of noncompliance - individual taxpayers who have stopped filing or have never filed their federal income tax returns. The number of delinquent individual taxpayers has steadily grown over the past several years. As of February 1993, the IRS had identified more than 10 million delinquent individual and business taxpayers. It is estimated that the related income tax gap for nonfilers is more than $10 billion. This makes the nonfiler problem one of the most serious compliance issues facing our voluntary system of taxation.

IRS research and compliance studies confirm the increasing number of nonfilers. In many cases, the nonfilers reported that their delinquency was triggered by a significant event in their life such as a divorce, death of a loved one, business failure, or other personal or economic problems. Taxpayers who failed to file a return often continued the pattern into future years due to the "snowballing" effect of the tax liabilities involved and the fear of getting "caught" by the IRS.

Nonfiler Strategy

In response to the growing nonfiler problem, the IRS has implemented a comprehensive nonfiler strategy. The strategy represents a Service-wide effort to combine enforcement and outreach activities first to identify delinquent taxpayers and then to provide them with the assistance needed to get back into compliance with the tax system. The Nonfiler Strategy represents a unique opportunity for the IRS and organizations such as Tax Executives Institute to work together to identify ways to help delinquent taxpayers meet their return filing obligations.

Enforcement-related activities under the nonfiler strategy will focus on increased examination activity of delinquent taxpayers. Specially trained examiners will be reassigned nonfiler cases for audit. The primary objective of this effort will be to secure delinquent returns and the associated taxes, interest, and penalties due. Examiners have been authorized to secure installment agreements in cases in which the taxpayer cannot immediately pay the tax liabilities determined.

Collection and Taxpayer Service will work with nonfilers to make payment arrangements in cases involving large deficiencies or unique circumstances. Offer-in-compromise guidelines and procedures have been revised to streamline the resolution of unpaid accounts when substantial doubt exists about the taxpayer's ability...