Tens of thousands of wealthy Americans have been avoiding filing tax returns, taking advantage of a loophole in the law that makes not filing a return a misdemeanor rather than a felony. Due to limited resources and staffing, the IRS has struggled to pursue these cases, resulting in millions of dollars in unpaid taxes. The agency began a renewed effort in early 2024 to contact high-income non-filers and urge them to file returns, resulting in additional tax revenue being collected. Despite these efforts, only a small percentage of the wealthiest non-filers have filed returns, with many facing little to no legal consequences for their noncompliance. The Treasury Department has proposed reclassifying these offenses as felonies, increasing the penalties for chronic non-filers. By increasing criminal penalties, the government aims to deter high-income individuals from evading taxes and shifting the burden of financing the federal government onto other taxpayers. The proposal seeks to encourage voluntary compliance and close the tax gap caused by wealthy non-filers.
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