Hunt for Nonfilers Turns up Millionaires, Lawyers, CPAs

In a crackdown on people who have not filed their tax returns, state and federal officials are finding millionaires, medical professionals, lawyers and other heavy hitters.

For example, the suspected list of nonfilers in California for 2002 includes 865 millionaires, 6,756 lawyers, 1,458 CPAs and 20,473 medical professionals, the Wall Street Journal reported.

Taxpayers who still haven't filed "have some explaining to do," said Steve Westly, the state controller and chairman of the California Franchise Tax Board.

Some people don’t file on time due to health problems or family crises. Tax-collection agencies also make mistakes, and disputes over whether someone who lives in one state needs to file in another are common. In some cases, nonfilers owe very little, said Ernest Dronenburg of Deloitte & Touche in San Diego and a former chairman of California's Franchise Tax Board.

Officials from the Internal Revenue Service and state agencies are hunting down people who don’t file for years, a problem that costs billions and has been difficult to beat. Officials are turning to sophisticated document matching programs, information sharing and tax amnesty programs to recover back taxes.

California has been a leader in chasing nonfilers. Officials there sent out notices to more than 700,000 individuals in the past year, asking for tax returns for 2002. In the previous year, the state sent out 647,580 notices to nonfilers asking for returns for 2001. The IRS will get the lists for “analysis and appropriate action,” an IRS spokesman said.

Officials in New Jersey and New York have also had success sharing information and coordinating efforts with the IRS.

If you haven’t filed, but think you’re OK because you’re owed a refund, think again. To get your money, you have to file within three years of the date your return was due.