Revenue generator: Go after wealthy tax deadbeats, GAO says

IRS focus on individuals, small business with income over $200k could bring in extra $1B.
NOV 08, 2012
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.

Latest News

GLP-1 users are trading retirement savings for their prescriptions
GLP-1 users are trading retirement savings for their prescriptions

A Nationwide survey finds 47% of GLP-1 users have never discussed the drugs’ financial impact with an advisor, even as many dip into savings.

Inspired Healthcare sale price of properties is 59% of $1.2 billion sold by advisors
Inspired Healthcare sale price of properties is 59% of $1.2 billion sold by advisors

The hundreds of millions of dollars from a sale of Inspired Healthcare properties does not mean an immediate windfall for investors.

Class action alleges Webull misled investors about China operations
Class action alleges Webull misled investors about China operations

Its SEC filings said one thing - a congressional probe said another.

Investors accuse Netcapital of inflating revenue through sham deals
Investors accuse Netcapital of inflating revenue through sham deals

Sham agreements allegedly padded revenue by 345%.

Pre-retirees are looking for flexibility, security, and guidance when it comes to retirement income: Cerulli
Pre-retirees are looking for flexibility, security, and guidance when it comes to retirement income: Cerulli

"Most pre-retirees are uncomfortable making key retirement income decisions without an advisor's help," said Chris Bailey of Cerulli.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor