IRS Signals Escalated Enforcement Against Nonfilers: What Cross-Border Taxpayers Should Know

Summary

The Treasury Inspector General for Tax Administration (TIGTA) has released a report finding that IRS efforts to pursue people who fail to file tax returns have not gone far enough — and the IRS says it will step up its response. For tax year 2022, TIGTA projects the gross tax gap — the estimated difference between tax owed and tax paid voluntarily and on time — at US$696 billion, with roughly US$63 billion (about 9%) attributed to nonfilers. The report notes that potential nonfilers grew by 5.9 million between tax years 2015 and 2022 as the IRS prioritized other inventories. It also found that under the high-income nonfiler initiative launched in 2024, tens of thousands of taxpayers remained in "first notice" status as of June 30, 2025, and estimates that continuing enforcement could secure returns or tax assessments in more than 10,000 cases worth approximately US$321 million in potential additional tax. The IRS agreed to all six TIGTA recommendations, including removing the hold on first-notice cases, developing an agencywide nonfiler strategy with executive oversight, and improving reporting of enforcement results so collection efforts can be properly assessed.

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Our Take

This report is a clear signal that "not filing" is no longer a problem the IRS is willing to leave alone. The stakes are different for cross-border filers: Canadian residents who are U.S. citizens, green card holders, or otherwise U.S. persons may owe U.S. returns even when they live in Canada and have little or no U.S. tax liability — and some who have fallen behind may have assumed the IRS has lost interest. The report suggests the opposite. Enforcement resources are being refocused on nonfiler inventories, and the IRS describes using analytics, automation and artificial intelligence to identify potential noncompliance earlier and expand early outreach. For anyone with U.S. filing obligations who has missed years, the practical lesson is that coming into compliance proactively — through the Streamlined Filing Compliance Procedures or other options where eligible — generally looks better than waiting for IRS contact, which can bring penalties and interest. Cross-border situations involve treaty positions, foreign tax credits and disclosure rules on both sides of the border, so consult a CPA familiar with Canada-U.S. filing before choosing any compliance path.

Disclaimer: This article is general information only and does not constitute tax advice; it should not substitute professional tax counsel. Please consult a licensed CPA for advice specific to your situation.