IRS Reaches Out to Bring Nonfilers
Back Into the Tax System

If you haven't filed a Federal tax return for a couple of years, you probably think the IRS is the last place you want to go, right? Wrong.

The IRS wants you back in the tax system and has special plans to help you help yourself. The IRS is reaching out to as many as ten million individuals and business taxpayers who have not filed tax returns and is inviting them back into the system. The IRS is taking a comprehensive approach to solving the nonfiler problem, offering specialized assistance and education to those who want to get right with their government. The IRS will also employ traditional enforcement steps for those who refuse to comply with the law.

The problem of nonfiling is costly to everyone. The IRS estimates that more than $7 billion in tax revenue is lost annually due to nonfiling. And the cost to the nonfiler is more than they may think. Interest and penalties continue to accrue on amounts they may owe, and many nonfilers could be due refunds.

"We recognize that taxpayers may have run into problems that caused them to drop out of the tax system," said IRS Commissioner Shirley D. Peterson. "We are gearing our education and assistance efforts towards helping them return to compliance. We believe that the vast majority of this country's citizens wants to comply with the law. Our goal is to help them and, ultimately to improve compliance for the long term.

"We also realize that, in some cases, enforcement will be necessary to gain compliance," she continued, "and we are ready to handle these situations, too. We will focus our enforcement resources on those taxpayers who willfully, repeatedly refuse to comply with the law.

"It is never too late to get right with your government," Commissioner Peterson emphasized. "The time to do so is now, not because this is a limited time offer but because we are offering to help people put this problem behind them so they can get on with their lives."

Peterson said that the goal of the IRS' efforts goes beyond just collecting delinquent returns. "We want to improve tax compliance across the board and the best way to start is to get everyone who is required to file a return to do so. This approach-- combining assistance and education efforts with direct enforcement-- marks a new way of doing business at the IRS," she concluded.

IRS research indicates that many people fail to file because of a personal problem, such as a divorce or death in the family, or a business reversal. In a pilot test of the nonfiler program, the IRS found that more than 60 percent of nonfilers were self-employed people who dealt in cash or were wage earners who had little tax withheld from their wages.

The IRS also finds that after not filing for one year, the nonfilers' problem compounds because fear of detection or the inability to pay causes nonfiling to continue. To allay these concerns, the IRS intends to review the facts in each nonfiler case to determine if the taxpayer is entitled to a waiver from penalties for failure to file and pay on time.

Also the IRS will work with taxpayers to set up installment payment schedules when the situation warrants. IRS policies for installment agreements and other collection procedures, such as offers in compromise of the tax debt, were recently reviewed and streamlined. These procedures will provide viable alternatives to resolve nonfiler's delinquent accounts if the taxpayer cannot pay in full.

Failing to file a return can cost taxpayers in other ways. they could lose out on some refunds. The IRs points out that refunds must be claimed within three years from he time the return was due or the refund is lost. Also, many of those taxpayers who are self-employed don't realize that the failure to file and pay self-employment tax could cause them to be ineligible for Social Security retirement or disability benefits.

Over the past few months the IRS has made preparation to offer assistance tailored to problems encountered by nonfilers. Local IRS offices have copies of prior year tax returns and IRS employees have been trained to help taxpayers reconstruct old records, such as income statements, needed to prepare the old returns. Working with local tax practitioner organizations and other volunteers, the IRS is offering assistance at convenient community locations.

The IRS also has reviewed its records to identify nonfilers and is reassigning 2000 examining agents-- around 10 percent of the examination staff-- to begin contacting them.

While the IRS stressed that this new approach to dealing with nonfilers is not a blanket exoneration, taxpayers who come forward voluntarily to file their delinquent returns should not fear criminal prosecution. "The IRS will not recommend criminal prosecution of any taxpayer who comes forward, makes a true voluntary disclosure, and files an accurate tax return," Commissioner Peterson said. "We want to encourage people to come forward voluntarily and get right with the government."

Additional information concerning assistance for nonfilers can be obtained by calling the IRS at 1-800-829-1040.

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