Report Suggests IRS Is Losing Compliance Battle

by Leroy Baker, Tax-News.com, New York

16 September 2004

A new report issued by the Treasury Inspector General for Tax Administration (TIGTA) has suggested that the Internal Revenue Service is failing to collect as much as $1 billion in taxes from individuals who fail to file tax returns.

According to TIGTA, the number of potential individual non-filers identified by the IRS who were not sent a return delinquency notice increased from 4.8 million for tax year 1994 to 6.7 million for tax year 2001.

TIGTA also found that IRS failed to pursue many taxpayers who ignored notices, securing only half the number of delinquent returns in 2002 that it did in 1999.

Furthermore, the report claims that more than 1.1 million of these 6.7 million unworked cases could have been expected to produce an average tax bill ranging from $518 to $5,309, and by ignoring them, the total cost to the Treasury could exceed $1 billion.

For Sen. Max Baucus (D - Mont), the findings are a cause for concern:

“The IRS is making gains but losing ground. The agency simply has more work than it can handle, and as a result, honest taxpayers are shouldering more of the tax burden,” he observed in a statement.

“Every week there are reports about compliance problems that undermine public confidence in the fairness of our tax system, and yet, Congress is preparing to cut the IRS’s budget. That may be penny wise, but it’s pound foolish,” warned Baucus.

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