IRS Fails to Pursue Thousands of Rich Tax Cheats, Watchdog Says

The Internal Revenue Service is letting hundreds of thousands of high-income individuals duck their tax obligations, according to a government watchdog report.

The Treasury Inspector General for Tax Administration found that 879,415 high-income individuals who didn’t file returns cumulatively failed to pay $45.7 billion in taxes from 2014 to 2016 and that the agency hasn’t tried to collect from many of those taxpayers. The IRS didn’t put 326,579 of the cases into its enforcement system, and it closed 42,601 of the cases without ever working on them.

“In addition, the remaining 510,235 high-income nonfilers, totaling estimated tax due of $24.9 billion, are sitting in one of the collection function’s inventory streams and will likely not be pursued as resources decline,” said the report, released Monday.

The report defines high-income taxpayers as those earning at least $100,000. The IRS didn’t immediately respond to a request for comment, but agency management in the report agreed with a recommendation to prioritize collecting from people who didn’t file tax returns.

Among those who haven’t paid their taxes are approximately 1,891 individuals who owe the IRS more than $1 million, according to the report. The number of people who have been failing to file tax returns -- a crime that could come with steep penalties or as many as five years in prison -- has been increasing in recent years.

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