More Aggressive IRS Fights the Shrinking Tax Gap
In 2001, the IRS was shortchanged $300 billion by taxpayers, a study
shows. But since that year, the IRS has become a much more aggressive
agency in pursuing taxes and taxpayer debts
By Stanley H. Block
$300 billion.
According to a study released
in March, that’s what the tax gap was in 2001. The tax gap is the total
amount of money paid to the IRS compared to the estimate of what should be
paid. That means, in 2001, there were $300 billion in taxes due that were
never paid.
That’s one heck of a balance
due.
“People who aren’t paying
their taxes shift the burden to the rest of us,” IRS Commission Mark W.
Everson said in a statement regarding the study.
But what’s newsworthy about
this study is not the staggering $300 billion figure. It’s the incorrect
picture that the study paints.
With that large of a tax gap,
most taxpayers would rightfully assume that the IRS is a lax agency and
that they could likely get away with cheating on their taxes or
underreporting their income.
Wrong!
Since 2001, the year that the
study examined, the IRS has dramatically stepped up its efforts to reduce
and prosecute tax cheats.
Among the steps the agency
has taken:
-
The IRS has increased its
enforcement revenues by nearly 28 percent, from $33.8 billion in 2001 to
$43.1 billion in 2004.
-
Audits of high-income
taxpayers — those earning $100,000 or more — topped 195,000 in fiscal
year 2004, which is more than double those conducted in 2001.
-
Total audits of all
taxpayers topped 1 million last year — a 37 percent jump from 2001.
-
The IRS has worked with
credit card companies to identify taxpayers who are using offshore bank
accounts to hide income.
-
Those using frivolous
tax-avoidance arguments in court are facing up to $15,000 in fines.
-
With the help of the
Justice Department, the IRS has issued more than 100 injunctions against
tax-scheme promoters.
“We are ramping up our audits
on high-income taxpayers and corporations, focusing more attention on
abusive shelters and launching more criminal investigations,” Everson
said. “Our enforcement efforts are designed to increase compliance and
reduce the tax gap.”
Taxpayers should consider
these facts when they begin to hear, as they will, the promoters of
tax-avoidance schemes trumpet the $300 billion tax gap. The truth is,
while there will always be a tax gap, the IRS is an incredibly aggressive
tax-collecting agency.
If you have tax debt, the
government will find you.
Stanley H. Block is a Maryland State Tax
Attorney and a member of the American Society of IRS Problem Solvers. You
can contact him at 410-727-6006 to obtain a free subscription to his newsletter
titled The IRS Times & Inquirer.
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