IRS And States To Pool Resources In Tax Evasion Fight

by Mike Godfrey, Tax-News.com, Washington

13 August 2003

In what is expected to be the first of many such agreements across the United States, the Internal Revenue Service is reported to be about to conclude an agreement with California's Franchise Tax Board which will put thirty of the state's more experienced tax examiners on the tail of local tax evaders.

Ideally, the IRS would like to repeat the Californian experiment in all of the other states across the union, in an effort to pool the expertise and resources of local and federal tax investigators on the battle front against tax evasion and tax sheltering schemes. According to IRS spokesman Ken Hubinak, agreements will even be made with states that do not levy an income tax.

"Now is the time to collect every dollar that we can," observed California Controller Steve Westly, as the state faces a projected $38 billion deficit next year. "We want to make sure that we are identifying everyone who is cheating the system and use our resources more efficiently to collect every dollar that is owed under the law," he added, according to a Smartpros report.

On the face of it, it appears to be a logical move for local and federal authorities to liaise more closely, as different agencies often find themselves pursuing the same individuals. The arrangement will also be mutually beneficial in that the IRS, whose resources are somewhat thin on the ground, can enlist more manpower, and cash-strapped states get to claw back some additional revenue.

The proposed deals between the states and the Revenue will result in the sharing of files prior to the launch of audits, and discussions on potential suspects.

"We are taking a proactive approach so California can work cooperatively and strategically with the IRS to identify tax evaders," Westly commented. "No state has ever done this before, but it makes sense because the FTB and the IRS are often looking at the same people, businesses and documentation," he added.

Also on the cards in California is a series of bills that will tighten the penalties for tax evasion and eliminate client/preparer 'privileged' information.

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