Tens of thousands of wealthy Americans are not filing tax returns due to a quirk in tax law that makes it a misdemeanor not to file but a felony to file falsely. This is resulting in low prosecution rates for non-filers. The IRS began efforts in early 2024 to contact high-income non-filers and encourage them to file returns. Notices were sent to 125,000 cases of wealthy taxpayers who had not filed returns since 2017, resulting in additional tax revenue being collected. Despite these efforts, only a small percentage of the highest-income filers have complied with the warnings. The IRS and Department of Justice have limited resources to pursue misdemeanor violations, resulting in low prosecution rates for non-filers. The Treasury Department has proposed reclassifying the offense of chronic non-filing as a felony to increase federal revenues and deter tax evasion. The proposal suggests imposing harsher penalties, including up to five years of imprisonment, for high-income taxpayers who willfully fail to file tax returns. Increasing criminal penalties for wealthy non-filers is seen as a more effective deterrent to tax evasion and may help close the tax gap by ensuring these individuals pay their fair share of taxes.
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Rich Americans are still avoiding the IRS crackdown on non-filers
