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 /ADVANCE/ WASHINGTON, Sept. 29 /PRNewswire/ -- 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 10 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," 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 the 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 2,000 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," 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 800-829-1040.
 IRS Plans to Bring Nonfilers Back into the Tax System
 Nonfilers -- A Growing Problem
 While the number of tax returns filed has increased over the past few years -- 110 million in 1988 to 114 million in 1990 -- the number of nonfilers has gone up, too.
 The IRS now estimates about 10 million individuals and businesses may not have filed. During 1991, the IRS inventories of apparently delinquent tax returns, representing one or more delinquent returns, increased by nearly 30 percent. The income tax gap attributable to nonfilers is over $7 billion annually.
 Who are the Nonfilers?
 A nonfiler could be just about anyone. IRS research shows that some Nonfilers have relatively low incomes. Most owe small balances and some are even entitled to refunds.
 But other nonfiler situations aren't so simple. Data from an IRS special nonfiler pilot project found that 64 percent were self- employed. Frequently these were "cash only" businesses or the taxpayer was an independent contractor with little or no taxes withheld or estimated tax paid. Often no returns had been filed for the taxpayer's business, either.
 Why Don't They File?
 Failure to file usually starts as a result of a significant event in the taxpayer's life -- a divorce, death of a loved one, starting up a new business or the failure of a business -- or because the taxpayer can't pay what's owed. Once taxpayers fail to file for one year, fear keeps them out of the system.
 What's the Cost of Nonfiling?
 -- Interest and penalties accrue on any amount the taxpayer may owe.
 -- Late filing penalty is 5 percent per month of the balance due up to 25 percent.
 -- Failure to pay is one half of 1 percent per month up to 25 percent.
 -- Interest is also due on the amount owed. Rates change quarterly and the rate beginning Oct. 1, 1992, is 7 percent.
 -- Refunds must be claimed within three years or they are lost.
 -- The majority of filed returns are refunds and the average was $968 in 1990.
 -- Refund returns must be filed within three years from the due date of the return. For example, the refund period for 1988 returns expired last April and it will run out for 1989 returns unless the taxpayer files by April 15, 1993.
 -- Loss of other benefits such as tax credits or Social Security payments.
 -- Many low income taxpayers with children are eligible for the earned income tax credit, a refundable credit which can be as much as $2,020. But a return must be filed to claim EIC.
 -- Self-employed individuals who do not file returns may lose credits toward their social security coverage in retirement or for disability. Self-employment tax is reported and paid on individual income tax returns. If no return is filed, the information relating to self-employment tax is not reported to the Social Security Administration.
 Here are some examples:
 -- A taxpayer who failed to file a tax return for 1988 and owed the average amount for that year -- $2,263 -- would owe the tax plus an additional $2382 in penalties and interest by Oct. 1, 1992.
 -- A married couple with two children and combined income in 1989 of $36,000, owed an additional $1,024 in tax on their return. But since they still have not filed, they now face an additional $750 in penalties and interest.
 -- A self-employed single individual with net earnings in 1990 of $52,713 would have owed a total of $18,217 in income and self- employment tax. The taxpayer made quarterly payments totaling $10,000 during the year, but did not file because there was $8,217 still due with the return. By not filing and paying on time, the total penalties and interest added more than $4,100 to the existing balance due.
 -- A single taxpayer failed to file in 1987 because he owed $1,000. Afterwards he was afraid to file even though he would have received refunds of $900 each year. The 1987 tax, penalty and interest, now total more than $2,340. He lost his right to his 1988 refund because the statue of limitations has expired but he still can get the refunds he is due for 1989 to 1991.
 What's the IRS' Plan?
 The IRS plans a program of special assistance and education as well as direct enforcement steps when necessary.
 -- Assistance and Education
 -- Copies of prior year tax returns are available at IRS
 -- IRS employees have been trained to help taxpayers
 reconstruct old records, such as W-2 or interest and
 dividend statements.
 -- IRS volunteers, including return preparers and other
 tax practitioners, are sponsoring assistance sites in
 community areas. Volunteers can help prepare forms and
 IRS workers can set up payment arrangements at the same
 -- Nonfiling penalties may be waived if there was a
 reasonable cause.
 -- Examples of reasonable cause include personal events, such
 as illness, death of a family member, and fires, natural
 disasters or other casualties that destroyed records.
 -- Attach a statement to the delinquent return explaining the
 reasons why it is late and ask IRS to consider a waiver of
 the penalties.
 -- IRS will offer payment arrangements whenever possible.
 -- Installment payment procedures were recently streamlined.
 -- In other cases the taxpayer can discuss an offer in
 -- Enforcement remains an option of last resort.
 -- 2,000 IRS agents have been reassigned to contact nonfilers
 who have been identified through IRS records. The agents
 will prepare returns for those who fail to file.
 -- In egregious cases, IRS will recommend criminal prosecution
 to the Department of Justice.
 Will Nonfilers Face Criminal Charges?
 The IRS has never recommended criminal prosecution to the Department of Justice when a taxpayer came forward and made a true voluntary disclosure of failing to file a return and files accurate returns of their own volition. Nonfilers generally only need to be concerned about talking with the IRS about whether penalties can be waived for reasonable cause and making arrangement to pay the delinquent taxes, interest and any penalties which may apply.
 -0- 9/30/92
 /CONTACT: Internal Revenue Service, Public Affairs, 202-622-4000/ CO: Internal Revenue Service ST: District of Columbia IN: SU:

TW -- DC008 -- 4357 09/29/92 11:39 EDT
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Date:Sep 29, 1992

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