Ask The California Employment Tax And Payroll Tax Attorney – The Truly Awesome Tax Gap
By Robert S. Schriebman
2022
Introduction
Awesome has become an overused term to describe almost any thing or any action. While the Grand Canyon is truly awesome, giving my coffee order to the barista at Starbucks isn’t. This article will discuss the IRS Tax Gap and what Commissioner Rettig is trying to do in dealing with it.
What Is the Tax Gap and How Large Is It?
The Tax Gap is the gap of taxes owed to the IRS as compared to the taxes actually collected. A few years ago, I was astounded to learn that the Tax Gap was about $2 billion. In those days they attributed the gap to the failure of yuppies to pay their taxes. That was then, what about now?
Today the gap is approaching $1 trillion! There is no end in sight. This figure is based on the IRS’ latest study involving the years 2012 – 2014 along with projections through 2019. Now, this is awesome and not in a good way!
What Are the Primary Causes of the Tax Gap?
Commission Rettig recently appeared before the House Committee on Oversight and Reform – Government Operations Subcommittee. He explained that the primary cause of the gap is not so much the impact of the pandemic, but on the inability of the IRS to deal with cryptocurrency. He explained that there is over a $2 trillion market gap in virtual currencies. It is estimated that cryptocurrency transactions have gone to over $14 trillion just in the United States. Of course, of the Tax Gap also deals with failing and struggling businesses unable to make payroll tax payments.
Some of the largest corporations and wealthiest individuals are also failing to pay their taxes.
What Is the Size of the IRS Manpower Dealing with the Tax Gap?
The IRS does not have the manpower to deal with the Tax Gap. Tax auditors do not collect the Tax Gap – IRS collectors known as Revenue Officers are in charge of this function. According to the Commissioner the IRS currently has fewer than 2000 Revenue Officers, “…the lowest number of field collection personnel since the 1970s.” This small army currently handles an inventory of more than 100,000 collection cases. The IRS has over 1.5 million cases awaiting assignment to these 2000 Revenue Officers.
It is almost impossible these days to audit and assess large corporations and wealthy individuals. They can afford to spend large amounts on lawyers, drag out proceedings and bury the IRS in paper. Commissioner Rettig admits that the IRS is “outgunned” in its efforts to assure a high degree of compliance from these taxpayers.
Tax Cheats Are Getting Away with Murder
The IRS Criminal Investigation Division is in charge of investigating and prosecuting tax cheats. Unfortunately, this agency is close to its lowest staffing level in the past 30 years. There are fewer agents, fewer cases and fewer successful convictions.
Commissioner Rettig’s Solution
The IRS Commissioner, no matter whom he or she may be, has only one workable solution – more money from Congress so more people can be hired. Looking at the issue of cryptocurrency. In 2010, Congress enacted the Foreign Account Tax Compliance Act, but has yet to appropriate the funding necessary for its implementation. As of this writing there are no active bills in Congress to appropriate more money for the IRS.
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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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