Shrink the Tax Gap
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Taking a Break
After about a year of nearly weekly Blogs to talk about our Shrink the Tax Gap proposal, we are going to take a break for a while to watch the reconciliation process unfold in the House and Senate. Thanks for joining us.
The IRS Should Make More Use of Commercially Available Software and Databases
The IRS has begun to look to commercial sources for software and databases that can help it identify underreporting of income more precisely so as to direct its audit resources more efficiently. In our book entitled The Business Case for IRS Transformation we recommended that the IRS address the tax tap by defining specific segments of underreporting…
Banks Are Wrong to Fight Proposed New IRS Disclosure Rule
We pleased to share with you an important and timely commentary published today in Bloomberg Opinion. In it, writers Charley Ellis and Alexander Boyle take on critics of the Biden Administration’s plan to properly fund the IRS. Charley is a legend on Wall Street and Alex is former Vice Chairman of Chevy Chase Bank. Charley and…
The Business Case for IRS Transformation
Congress is now considering the administration’s major program of long-term funding and other authorities for the IRS as part of its broad reconciliation package. If this program passes it will help the entire tax administration system be more fair and more effective. It will reduce the “tax gap” by collecting billions in taxes owed but…
What’s the Resistance to the New Information Report?
From our first article in March 2020, a key means of shrinking the tax gap is getting information from financial institutions to make currently opaque income information more visible. We proposed a new 1099-type information report that would have two numbers – tax year total deposits and total withdrawals. The Administration’s American Families Plan proposes the same,…
Should Uncertainties Delay Approving the Administration’s Tax Gap Program?
Short answer: No. We must not let the perfect be the enemy of the good. Slightly longer answer: The clock is ticking. The US Treasury is deprived of over $57,000,000 every hour that there is no progress toward shrinking the Tax Gap. It would be great if we could be precise about the size of…
Nine Questions (with answers) About the Administration’s Tax Compliance Proposal
We published an article in the August 2nd issue of Tax Notes Federal called “How to Evaluate the Biden Administration’s Tax Compliance Plan.” With permission from the publisher, we now have the full article on our website. In the article, we address nine specific questions that we have been hearing and we provide detailed answers: What’s the…
IRS Workforce Investments are Essential to Shrinking the Tax Gap
by Guest Blogger Ron Sanders While technology investments are critical to the Administration’s program to shrink the tax gap, so too are investments in its most important resource, its people. Former IRS Commissioner Charles Rossotti and I recently published a strategy for rebuilding the IRS’s workforce that centers on legislative reforms to dramatically improve the way the…
Is Expanding the IRS a Partisan Matter?
The so-called $1.2 trillion bi-partisan infrastructure agreement originally included $40 billion for expansion of the IRS, with a net return of $100 billion over 10 years. While this differs materially from the Administration’s $80 billion investment recommendation, it would have been a good start, especially with bi-partisan support. As we have noted in published articles…
Building the IRS of the Future, Part 3 – Taxpayer Service
We continue with our series on our proposal to transform the Internal Revenue Service, one that facilitates voluntary compliance, bolstered with additional information on currently opaque income. This week we focus on taxpayer service. Over the last few months, at Congressional hearings, in the media, and likely in speaking with your friends, you have heard…
IRS Funding is Not All About Auditing
According to news reports, one part of the $1.2 Trillion bi-partisan infrastructure program that President Biden has agreed to is $40 Billion for the IRS over the next 10 years. According to these same reports, that $40 Billion will generate $100 Billion over that same period, for a net of $60 Billion. The Wall Street…
Building the IRS of the Future, Part 2 – Audit Effectiveness
As we noted in last week’s blog, just growing the size of the IRS will not make it the effective organization that taxpayers want and deserve. Rather, our proposal uses additional information and modern technology to transform the way it operates. In this blog, we focus on how the IRS selects a tax return for…
Building the IRS of the Future
The IRS needs additional funding to restore essential staff just to answer the phones, open the mail and attend to the many additional jobs, like the Child Tax Credit, that the Congress is asking them to do. However, just growing the size of the IRS will not make it the effective organization that taxpayers want…
After 10 Years, Shrinking the Tax Gap Accelerates
Last week’s Blog discussed the wide range of estimated shrinkage of the Tax Gap over the first 10 years of the Program, from $480 Billion to $1.4 Trillion. In the end, whether the high or low number is correct, beefing up the IRS budget by an additional $80 billion over the 10 years is a…
The Perfect is the Enemy of the Good (very good in this case)
There is rare agreement on an important topic in Washington: the tax gap exists, and it is BIG!! The last detailed study – conducted by the IRS in 2011-13 – pegged the tax gap at $441 billion. We did our own analysis and estimate that in 2019 the tax gap was $574 billion. In recent…
Shrinking the Tax Gap is Bipartisan
From the beginning, we have said that Shrinking the Tax Gap is simply the right and fair thing to do. It is not a Democratic or Republican political cause. It is not political in any way. Indeed, our logo (below) reflects the bipartisan characteristic of ensuring everyone reports and pays all the taxes that they…
Legislation is Essential to Successfully Shrinking the Tax Gap
The program that we have proposed to Shrink the Tax Gap is a 10-year effort that will require major funding, though the payoff is huge, both financially and in terms of tax fairness. Historically, the IRS has been funded year-to-year, even for their major systems modernization programs. This has led to declining year-over-year budgets for…
Help Taxpayers File Accurate Returns, But Audit When They Don’t
In the previous two Blog posts, we discussed the need for additional taxpayer information and the more effective use of modern technology. Another key to shrinking the Tax Gap is how the IRS uses those additional capabilities. There are two essential aspects to this: Providing top-notch taxpayer services, and Auditing only when the likelihood of…
Effective Deployment of Modern Technology is Key to Shrinking the Tax Gap
The technology needed to Shrink the Tax Gap is available today. In fact, the IRS already has much of it in house. However, in part because the IRS’s current core processing systems are so old they can’t take advantage of modern technology, like machine learning, and in part because of budget reductions and workload increases…
The Key to Shrinking the Tax Gap: A New Information Report
When asked why he robs banks, Willie Sutton famously said: “Because that’s where the money is!” Roughly the same kind of detective work can explain much of the Tax Gap. For taxpayers whose income is entirely or mostly reported to the IRS on W-2’s and 1099’s, 98% of these filers report their income totally and…
Biden Budget Outline is a First Step Toward What is Needed to Shrink the Tax Gap
The Tax Gap is all the money that is legally due under the tax law but is not collected each year—now up to $574 billion per year. The Tax Gap is a result of a minority of mostly upper income taxpayers not reporting all their income and therefore not paying all the taxes they legally…
How Do We Propose to Shrink the Tax Gap?
In our prior Blog posts, we have explained what the Tax Gap is, what causes it and provided some comparative information to help you realize how huge $574 Billion per year is. For the next few posts, we will explain our approach to reducing the Tax Gap over the next 10 years and beyond. Our…
How Big is the Tax Gap? Part 2
The tax gap is almost $600 billion per year; money due the government under the tax code that is not paid and never collected. Just missing. Most of us can’t imagine a number that big so here’s another way of looking at it. It’s almost as much as the government spends for all domestic programs such…
It’s Tax Time, But Not Everybody is Paying What They Owe
The Tax Gap is all the money that is legally due under the tax law but is not collected each year — now up to $574 billion per year. Why should you care if somebody else isn’t paying their taxes? Think about this: The Tax Gap is more than ALL the income taxes paid by…
Everyone Who Pays Their Taxes Should Support Shrinking the Tax Gap
The Tax Gap is all the money that is legally due under the tax law but is not collected each year—now up to $574 billion per year. If taxes in any form are increased, they will be paid by the people who are already paying, increasing the tax gap even more. Let’s make it a…
Shrinking the Tax Gap is Non-Partisan
The Tax Gap is all the money that is legally due under the tax law but is not collected each year — now up to $574 billion per year. The Tax Gap is a result of a minority of mostly upper income taxpayers not reporting all their income and therefore not paying all the taxes…
How Big is the Tax Gap?
The tax gap is almost $600 billion PER YEAR: money due the government under the tax code that is not paid and never collected. Just missing. Most of us can’t image a number that big so here’s another way of looking at it. It is more than ALL the income taxes paid by 90% of individual…
Is the Tax Gap Fair to Small Business? Part 2
The tax gap is the all the money that is legally due under the tax law but is not collected each year. That’s almost $600 billion per year. No business would accept such an enormous loss, but each year the loss grows because the government fails to do enough to collect it. A lot of…
Why Does the Tax Gap Keep Getting Bigger?
The Tax Gap is all the money that is legally due under the tax law but is not collected each year. That is a $574 billion loss to the government in 2019—an increase of over 50% in the prior 8 years. That loss is now more than all of the income taxes paid by 90%…
How to Level the Playing Field for Small Business
$574 billion. That’s how much tax was due but not paid in just one year, 2019. $574 billion. That huge loss grows each year because the government fails to do enough to collect it. If you are a small business owner, why should you care? A lot of that loss comes from businesses that fail…
Is the Tax Gap Fair to Small Business?
The tax gap is the all the money that is legally due under the tax law but is not collected each year. That is almost $600 billion per year. No business would accept such an enormous loss, but each year the loss grows because the government fails to do enough to collect it. A lot…
Why Doesn’t the IRS Reduce the Tax Gap?
The Tax Gap is all the money that is legally due under the tax law but is not collected each year. That was a $574 billion loss to the government in 2019 — an increase of over 50% in the last eight years. That loss is now more than all of the income taxes paid…
Is the Tax Gap Just About Money for the Federal Government?
The Tax Gap measured in money: it is all the money that is legally due under the tax law but is not collected each year. But shrinking the Tax Gap is NOT just about money. It’s about making our federal government fairer to every American who pays their taxes. The Tax Gap is a result…
What Is the Tax Gap?
The Tax Gap is all the money that is legally due under the tax law but is not collected each year. That is almost $600 billion per year. No business would accept such an enormous loss, but each year the loss grows because the government fails to do enough to collect it. The Tax Gap…
Welcome to the Shrink the Tax Gap Blog
The Internal Revenue Service fails to collect over $574 billion in taxes owed each year, more than 90% of all taxes paid by individual taxpayers. In two articles published in Tax Notes we propose a program for directly addressing a large part of this tax gap with a combination of new information reporting and more…
Shrink The Tax Gap 
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