Ask The California Employment Tax And Payroll Tax Attorney – The Shameful Tax Gap Is Now Almost $500 Billion!

By Robert S. Schriebman

2022

Introduction

If you are not familiar with the “Tax Gap,” allow me to enlighten you. The tax gap is the difference between those who pay taxes and those who owe the IRS for one reason or another. When I first started practicing tax law, the gap was measured in the millions of dollars. The gap was either ignored or treated by the federal government as the cost of doing business. That was then, this is now: An IRS bulletin recently announced that the tax gap on the years 2014 through 2016 is now close to $500 billion, an increase of close to $60 billion from very recent prior estimates. We all know that a billion dollars does not buy what it used to. According to IRS Commissioner Charles Rettig, “The increase in the tax gap estimates reflects that the IRS needs to do more, both in improving taxpayer service as well as working to improve tax compliance.”

There are many reasons for the increase in the tax gap. As far as the IRS is concerned the gap has grown due to the reality that there are only about one third of tax collectors known as Revenue Officers than the IRS usually carries on its roster. Collection enforcement is at its lowest level in decades; many people are thumbing their noses at the IRS and not paying their taxes. Commissioner Rettig hopes that the $80 billion just appropriated through the Inflation Reduction Act will help close the gap. Commissioner Rettig, who will retire in mid-November, stated the Act “will help the IRS in many ways, increasing taxpayer education, significantly improving services to all taxpayers and focusing on high-income/high-wealth non-compliance in a fair and impartial manner supporting compliant taxpayers.”

The American system of taxation is a voluntary system. Voluntary compliance has traditionally been at a high rate of over 85%. But the estimated 15% non-compliant taxpayers are significant when one tries to contemplate the benefit to this nation $500 billion would bring.

What is the cause of this non-compliance? Basically, it is composed of non-filers and those who underreport and underpay their fair share.

Conclusion

A recent report published by Commerce Clearing House (CCH) tells us that the IRS estimates that the gap will grow between 2017 through 2019 to a staggering $540 billion. Just think what this money would do to revamp the infrastructure of our country, house the homeless, and feed the hungry, as well as strengthening and modernizing our men and women in uniform.

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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 50 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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