Revenue generator: Go after wealthy tax deadbeats, GAO says

IRS focus on individuals, small business with income over $200k could bring in extra $1B

Jan 4, 2013 @ 3:26 pm

By Liz Skinner

Congress' research arm is offering a cheap way for the Internal Revenue Service to collect more of the nation's unpaid taxes — focus even more enforcement on wealthier taxpayers.

A new Government Accountability Office analysis of the IRS' efforts to collect unpaid taxes from citizens and small businesses in 2007 and 2008 found that exams focused on those with an income of $200,000 or more produced “significantly more” direct revenue per dollar of exam cost.

The government researchers concluded that by shifting about $124 million in enforcement resources away from lower-income returns to returns from individuals and small businesses showing income of $200,000 or more, the IRS could bring in about $1 billion more than the $5.5 billion it now collects with these resources.

More attention has been focused in recent years on the tax gap — the difference between the amount owed and how much is paid on time — as the nation looks for ways to trim the federal deficit. Congress asked the GAO to analyze how much is actually collected as a result of its enforcement efforts.

“The tax gap has been a persistent problem in spite of extensive congressional and IRS efforts to reduce it,” James White, director of tax issues for the GAO, wrote in a letter to Sen. Max Baucus (D-Mont.) and Sen. Orrin Hatch (R-Utah ), and Rep. Charles Grassley (R- Iowa).

The tax gap was about $450 billion in tax year 2006, though eventually it decreased to $385 billion through delinquent payments and enforcement actions, according to IRS estimates cited in the GAO report.

The government already spends a disproportionate amount of its budget examining the nation's higher earners. The IRS spent about 20% of the $1.6 billion a year it devoted in 2007 and 2008 on returns with income of more than $200,000, even though those returns accounted for only 3% of the total 136 million returns filed, according to the GAO report.

The GAO analysis said exams of individual tax returns reporting income of between $200,000 and $1 million generated $25.60 per dollar of cost and those reporting $1 million and more generated $47.20 per dollar of cost, the report said. Exams of tax returns for lower-income earners generated about $5.40 to $7.40 for every dollar spent.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

The power of automation

With good data and great workflow processes, advisers can outpace the competition. Junxure's Robert DeFrancis offers some strategies for success.

Latest news & opinion

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

PIABA accuses Finra of conflicts of interest

Public Investors Arbitration Bar Association report slams self-regulator over its picks for board of governors.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print