Ask The California Employment Tax And Payroll Tax Attorney – The IRS Tax Gap – What’s Being Done About It

By Robert S. Schriebman

2019

Introduction

A billion dollars can do a lot of public good. A billion dollars can go a long way in supplying and protecting our military men and women. Just think how far $458 billion will go! That’s the amount of the tax gap as it existed at the end of the fiscal year of 2016. After some adjustments the IRS estimates that it’s more like $406 billion.

What Is the Tax Gap?

Putting it simply the tax gap is all about either cheating on your taxes or not paying them at all. The IRS believes that this gap is only going to grow. 81.7% of America’s taxpayers voluntarily and timely pay their taxes, but almost 19% do not.

What Causes the Tax Gap?

The General Accounting Office (GAO) conducted a recent study and found that there are three important factors that contribute to the tax gap.

• Limited third party information reporting
  The extent to which individual taxpayers accurately report their income is closely aligned with whether employers accurately report wages and withholdings
• IRS resource tradeoffs
  It’s no secret that the IRS is short on help. IRS budget and staffing levels have fallen off over the past decade, but the workload and responsibilities of the IRS is on the increase.
• Tax code complexity
  I have been practicing tax law for over 50 years. When I first started the Code was small and fairly simple. Now it is two huge volumes with unbelievable complexities. I doubt that there is any one person or group of persons who have it mastered.

Over the years the GAO has made recommendations to the IRS and the Treasury Department, most of which has not been fully implemented. New legislation is needed to target specific areas of noncompliance.

What Is Being Done About the Tax Gap?

According to the GAO study (GAO-19-558T) there is an internal paralysis in the system. The gap is huge and the resources at the IRS are shrinking. Each year the following problems continue to grow: (1) underreporting of tax liabilities on timely filed tax returns; (2) underpayment of taxes due from timely filed returns; (3) nonfiling, when a taxpayer fails to file a required tax return on time or altogether.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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