IRS Urged To Research Mismatched Tax Reporting Documents

by Mike Godfrey, Tax-News.com, Washington

13 September 2007

Senate Finance Committee Chairman Max Baucus (D-Mont.) has called on the US Internal Revenue Service to make better use of information reporting documents in order to collect more of the $345 billion 'tax gap'- the gulf between Federal taxes legally owed and those actually collected each year.

A Treasury Inspector General for Tax Administration (TIGTA) report released on September 11 found that in tax year 2004, the IRS failed to match almost four million income statements to tax returns, allowing individuals to underreport their income or avoid filing tax returns altogether. The report also recommended tax law changes that would allow employers to validate employees’ Social Security numbers, a provision Baucus supported in 2006.

“Making sure that the numbers match up on tax returns and income statements is basic to proper administration at the IRS,” stated Baucus. “The IRS should take some common-sense steps to tighten up its processes and stop the willful violation of tax laws.”

The TIGTA investigation found that mismatched statements accounted for $150 billion in earnings in 2004. TIGTA used automated data systems already in place at the IRS to match up 50% of the statements in the audit. Recommendations to use automated data systems already in place to research, investigate, and resolve miscellaneous document cases was an element also included in the Treasury Department’s plan to reduce the tax gap, delivered to the Finance Committee at Baucus’s request in August of this year.

In addition, the TIGTA report advised that the Treasury pursue tax law changes that would give employers the ability to use IRS databases to validate Social Security Numbers provided by job applicants. This proposal was included in legislation supported by Baucus in the 109th Congress, the Telephone Excise Tax Repeal and Taxpayer Protection and Assistance Act of 2006.

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