We want to thank in advance anyone who offers support and/or constructive suggestions for our proposal to Shrink the Tax Gap.
It was with great interest that I read your material. I believe the IRS has accomplished much in recent decades. System capabilities were upgraded to address specific problems, new programs and systems were delivered to support ACA, electronic filing has reached levels considered only aspirational less than 20 years ago, etc. Budget and staffing cuts have had an impact upon enforcement, but the Service has delivered amazingly well under the circumstances. Despite any accomplishments, across all the decades since I first joined IRS in 1977, the Service has always been playing catch up. I believe the TCAM proposal would close much of the gap between what IRS is today, and what it could be with the right investment.
The initial focus on the single largest source of revenue loss should interest the new Administration and law-makers on Capital Hill. This additional revenue does not require contentious tax policy debate but does assure that whatever policies are in place, the IRS will have the capabilities to better assure the collection of the revenue intended by the policy. One universal principle of tax administration holds that if you speed up the process of collecting taxes owed, you will collect more and at a lower cost. IRS systems have not previously provided the capability to address the small business tax gap with the necessary speed. I believe that TCAM would efficiently deliver that capability for both this major revenue gap and for future broader tax compliance initiatives.
Congratulations on a well-constructed proposal.
Charles has a great point here. I testified in Congress several times when I was U.S. Comptroller General on the need and ways to address the “tax gap”. It’s worse now!
The Tax Compliance and Assistance Modernization (TCAM) proposal sets out an elegant solution to a component of the tax gap that has been challenging for the IRS to address fairly and effectively.
First, TCAM starts with the maxim that transparency increases tax compliance and proposes additional information reporting for a discrete population of taxpayers for whom the revenue impact of unreported income is great.
Second, the proposed Comprehensive Return Analysis process uses this and other historical data to screen out taxpayers who present as low-risk and to minimize false positives, thereby narrowing the IRS’s focus on taxpayers who require closer scrutiny while reducing the likelihood of a compliant taxpayer being subjected to an ultimately “no change” audit. Where there are false positives, the selection models will learn from these instances and be updated.
Finally, the proposal not only improves case selection but also case management and taxpayer assistance. In the latter regard, the proposal contemplates more tailored and specific taxpayer notices, which are more salient to the taxpayer, and acknowledges the ongoing need for personal interaction with taxpayers through emails, chat and telephone, including call-back technology.
This is an impressive, comprehensive, and realistic proposal that deserves serious consideration as we all strive to make our tax system more fair and just.
Charles did wonderful things to lift the IRS during his leadership. This proposal is logical and deserves serious consideration. Our IRS systems need to be fit for purpose for the current task.
Charles has highlighted an important area for consideration by the new Administration as they search for additional sources of revenue to help fund new programs as well as ongoing operations of the government.
While much of the tax gap is not collectable because of an inability to pay on the part of some taxpayers, Charles appropriately notes the significant funds available if we combine new, non-burdensome reporting requirements with the additional compliance and collection resources necessary to make a significant dent in the tax gap.
The IRS has always been a good investment for the government, returning to the Treasury multiples of the resources provided. Charles’s detailed analysis demonstrates that this is especially true in an area such as pursuing the uncollected taxes that make up the tax gap.