IRS to halt ERC Claims
A recent Treasury Inspector General for Tax Administration report reveals that IRS "sweeps" targeting high-income nonfilers have proven remarkably effective. Between fiscal years 2021-2022, revenue officers working these cases secured more returns and collected significantly more dollars compared to standard cases. For tax years 2014-2020, officers consistently collected more per sweep case than non-sweep cases.
However, this enforcement strategy faces uncertainty amid substantial workforce reductions. According to TIGTA, more than 11,000 IRS employees (approximately 11% of the workforce) have been laid off this year under the Trump administration's federal workforce reduction efforts. Revenue agents have been particularly affected, with 31% either laid off or accepting voluntary buyouts.
IRS sweeps are targeted enforcement actions designed to address backlogs of high-priority tax cases in understaffed locations and support specific compliance initiatives. The IRS expanded this strategy between 2019-2022, culminating in former Commissioner Werfel's 2024 initiative targeting individuals who hadn't filed returns since 2017.
Despite workforce reductions, data suggests the IRS will likely continue prioritizing high-income nonfiler enforcement where resources permit. Tax practitioners should identify clients with unfiled returns, particularly those with significant income, and prioritize voluntary compliance before IRS contact.
The TIGTA report identified several geographic areas with high concentrations of high-income nonfilers that have seen limited or no sweep activity, including eastern New Mexico, western Texas, northwestern Nevada, and Wyoming. Practitioners with clients in these regions should prepare for potential future enforcement actions.
TIGTA recommendations suggest future sweeps may capture more comprehensive information, including which delinquent tax return modules were secured and whether returns had tax assessments. This means practitioners may face more thorough, data-driven inquiries during enforcement actions.
The report noted that the IRS Field Collection team isn't consistently using sweeps to train employees. Combined with workforce reductions, practitioners may encounter less experienced personnel handling complex cases and inconsistent application of procedures.
TIGTA also found data quality issues, including missing or inaccurate information in fundamental fields such as taxpayer names and addresses. While these were corrected for the audit, such errors could lead to misdirected communications and case delays.
With the IRS under resource constraints yet maintaining focus on high-income nonfilers, practitioners should be proactive with voluntary disclosure, document thoroughly, prepare clients for potential delays, and leverage their expertise regarding taxpayer rights. Given the potential for less experienced personnel handling cases, practitioners' knowledge becomes increasingly valuable.
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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