Tens of thousands of wealthy Americans are not filing tax returns, taking advantage of a loophole in federal tax law that makes it a felony to file false returns but only a misdemeanor not to file at all. Due to limited resources for enforcement, these individuals are unlikely to face prosecution for not filing their taxes. In 2024, the IRS began contacting high-income non-filers urging them to file. This initiative resulted in nearly 26,000 filers and $292 million in additional tax revenue. However, only a fraction of the wealthiest non-filers, those making over $1 million annually, have complied with filing their returns. Despite Treasury’s proposal to reclassify non-filing offenses as felonies, the current limitations in resources have hindered enforcement efforts against these tax evaders. The lack of consequences faced by these wealthy non-filers has led to a significant loss of revenue for the government. Increased criminal penalties for high-income tax evaders could serve as an effective deterrent to non-compliance, encouraging voluntary filing and reducing the tax gap caused by wealthy individuals who avoid paying their fair share. By holding these individuals accountable, the government can ensure that all taxpayers contribute their share to funding the federal government’s operations.
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