IRS Expected to Increase Enforcement Against Non-filers: What Taxpayers With Unfiled Returns Should Know

By Zaher Fallahi, Tax Attorney, CPA
Downtown Los Angeles & South Coast Plaza, Orange County
310-719-1040 | 714-546-4272

Taxpayers who have failed to file required federal income tax returns should take notice. A recent report by the Treasury Inspector General for Tax Administration (“TIGTA”) indicates that the Internal Revenue Service intends to strengthen its approach to identifying and pursuing non-filers, particularly higher-risk and high-income taxpayers.

TIGTA’s August 31, 2026, report, Agencywide Coordination Could Enhance the IRS’s Approach to Non-filers, found significant weaknesses in the IRS’s prior handling of non-filer cases but also describes corrective actions that could result in more focused enforcement going forward. The IRS agreed with all six of TIGTA’s recommendations.

The Number of Potential Non-filers Has Increased Significantly

According to TIGTA, the number of potential individual non-filers identified through the IRS’s principal identification process increased from approximately 8.8 million for tax year 2015 to approximately 14.7 million for tax year 2022, an increase of approximately 5.9 million. Most of that increase occurred among taxpayers in the under-$200,000 income category.

The revenue implications are substantial. TIGTA reported that the projected gross federal “Tax Gap” for tax year 2022 was approximately $696 billion, of which approximately $63 billion, or 9%, was attributable to non-filers.

These figures help explain why non-filer enforcement is likely to remain an important IRS compliance priority despite the agency’s recent budget and workforce constraints.

High-Income Non-filers Are a Particular Enforcement Focus

In February 2024, the IRS launched a high-income non-filer initiative focusing on higher-priority cases. The initiative followed a period in which IRS non-filer enforcement operated only sporadically because of staffing and budget limitations.

TIGTA subsequently identified a significant enforcement bottleneck. As of June 30, 2025, 38,824 high-priority cases involving 33,653 taxpayers remained in first-notice status, preventing those cases from proceeding through further collection activity. TIGTA estimated that releasing these cases could result in secured returns or tax assessments in 10,482 cases involving 9,119 taxpayers, with approximately $321.3 million in potential additional tax due. After TIGTA raised the issue, the IRS reported that it moved the affected cases out of first-notice status in March 2026.

TIGTA separately identified 10,969 cases involving 8,853 taxpayers awaiting further assignments. It estimated that prioritizing those cases could result in secured returns or assessments in 2,962 cases affecting 2,399 taxpayers, with approximately $90.8 million in potential additional tax due.

The practical significance for taxpayers is straightforward: administrative delay at the IRS should not be mistaken for abandonment of a non-filer case.

How the IRS Non-filer Process Works

The IRS uses third-party information—including information reported on Forms W-2 and other information returns—to identify taxpayers who may have been required to file but did not do so.

Once an individual non-filer is selected for the Return Delinquency Program, the IRS generally begins with a CP59, First Notice—Return Delinquency. A taxpayer generally has eight weeks to file before the IRS sends the second and final delinquency notice, CP518. If the taxpayer still does not file, the case may proceed to Taxpayer Delinquency Investigation status and potentially to the Automated Collection System, the Automated Substitute for Return Program, or another enforcement function.

The IRS may ultimately prepare a Substitute for Return (“SFR”) based primarily upon information available to the government. An IRS-prepared substitute return may not reflect deductions, credits, exemptions, basis, business expenses, or other taxpayer-specific items that could affect the correct tax liability.

Continued noncompliance may also lead to collection or examination activity and, in appropriate cases, potential criminal enforcement.

An Unfiled Return Can Become More Serious With Time

Failure to file should not be confused with merely owing taxes.

A taxpayer may have filed a return but be unable to pay the balance due. That is generally a collection problem. A taxpayer who was required to file but did not file has a separate filing-compliance problem that ordinarily should be addressed before many collection alternatives can be effectively pursued.

Moreover, TIGTA specifically notes that willful failure to file a required individual income tax return can constitute a criminal offense under Internal Revenue Code § 7203. In discussing that provision, TIGTA describes willfulness as intentionally violating a known legal duty.

This does not mean that every late or unfiled return is a criminal matter. Nevertheless, taxpayers with multiple years of unfiled returns—particularly cases involving substantial income, businesses, cryptocurrency, foreign assets, foreign accounts, or international information-reporting obligations—should consider obtaining professional advice before communicating with the IRS.

The IRS Plans to Use Analytics and Automation

TIGTA recommended that the IRS better identify and prioritize its highest-risk non-filer populations. The IRS agreed and stated that it would explore using analytics to better prioritize high-risk non-filers for appropriate enforcement treatment.

This is particularly significant because the IRS already receives substantial amounts of third-party financial information. A taxpayer who has not heard from the IRS should therefore not assume that the government is unaware of an unfiled return.

IRS Staffing Reductions May Affect Timing—But Not Necessarily Enforcement Priorities

The IRS is simultaneously dealing with substantial workforce reductions. TIGTA reported that IRS staffing declined from approximately 103,000 employees in January 2025 to approximately 74,000 in January 2026, a reduction of approximately 30%. Certain Collection functions experienced even larger percentage reductions. Nevertheless, IRS Collection management told TIGTA that it did not anticipate pausing the non-filer programs, although the number of cases worked may have to be adjusted based upon available resources.

Accordingly, taxpayers should not interpret a period of IRS silence as resolution of an un-filed-return problem.

Voluntary Compliance Is Generally Better Than Waiting for Enforcement

For a taxpayer who knows that one or more required returns have not been filed, waiting for increasingly serious IRS enforcement is rarely a sound strategy.

The appropriate approach depends upon the taxpayer’s particular circumstances. A tax attorney or other qualified tax professional may need to determine which returns were actually required and remain unfiled; whether the IRS has already prepared or is preparing a Substitute for Return; whether sufficient records exist to prepare accurate original returns; whether penalties may qualify for reasonable-cause or other relief; and whether related payroll, business, cryptocurrency, foreign-account, FBAR, FATCA, or international information-reporting issues exist.

Where the facts present potential civil-fraud or criminal-tax concerns, additional precautions may be necessary. In such cases, taxpayers should consider obtaining legal advice before making statements or providing explanations to the government.

Once filing compliance has been restored, the taxpayer and adviser can then address the appropriate collection alternatives for any remaining federal tax liability.

The Bottom Line

The TIGTA report reveals two important realities: the IRS has experienced significant resource constraints, but it also possesses a very large inventory of identified potential non-filers and has agreed to improve how it prioritizes and pursues those cases.

For taxpayers with outstanding filing obligations, the safer assumption is that an unfiled return has not disappeared merely because the IRS has not recently contacted them.

Addressing the problem proactively may provide substantially more control over the process than waiting for an IRS notice, Substitute for Return, assessment, collection action, or potentially more serious enforcement.

Zaher Fallahi, Tax Attorney, CPA
Downtown Los Angeles & South Coast Plaza, Orange County
310-719-1040 | 714-546-4272

This article is intended for general informational purposes only and does not constitute legal or tax advice. Tax laws and IRS procedures are subject to change, and the appropriate course of action depends upon each taxpayer’s particular facts and circumstances.

Source: Treasury Inspector General for Tax Administration (TIGTA), Agencywide Coordination Could Enhance the IRS’s Approach to Non-filers, Report No. 2026-308-047 (Aug. 31, 2026).