Greenberg Traurig Alert

IRS To Pursue Non-Filers

November 1999
By Barbara T. Kaplan, Greenberg Traurig, New York Office

  View or download the PDF version of this Alert here.

In an apparent effort to stem the tide of repeat failure-to-file offenders, the Internal Revenue Service ("IRS") is planning a major new initiative focusing on nonfilers. The initiative is to be headed by the assistant director of the Kansas City Service Center.

According to reports in the tax press, there has been a recidivist rate of over 30 percent for nonfilers who previously took advantage of the 1992-1995 nonfiler initiative. Therefore, the IRS is planning a large and sustained commitment of resources to the new nonfiler project.

Details of the program have not been announced and it is unclear whether the IRS intends to investigate and seek criminal prosecution of repeat nonfilers. Nor is it known whether newly identified nonfilers will be allowed to file delinquent returns and pay the tax due without fear of a criminal charge being pursued.

With the knowledge that a compliance initiative for nonfilers is imminent, now is a good time to review whether you have been in full compliance with all tax filing obligations. This includes personal and corporate income tax returns, employment tax returns, excise tax returns and various information returns. Individuals and entities that previously took advantage of the 1992-1995 nonfiler initiative and who have again become delinquent need to proceed with particular caution and professional advice.

Another major initiative the IRS is planning is in the "fast-growing" area of noncompliance by individuals and corporations in the use of trusts. The IRS is training its staff in this area and plans in 2001 to begin matching tax returns with the Schedules K-1 of partnerships and S corporations. The IRS is already matching estate and trust returns. These matching efforts are sure to uncover nonfilers who previously went undetected. The spillover from the trust initiative, therefore, can impact on nonfiler detection by the IRS.

Considered and careful planning for nonfilers and repeat nonfilers can produce positive results without fear of prosecution and incarceration or public disclosure.

© 1999 Greenberg Traurig