The Tax Gap: What is being done now to close the gap?
The Internal Revenue Service conducts a number of enforcement programs, which together raised $49 billion in fiscal 2006. The biggest source of enforcement revenue is collection of taxes reported or assessed but not paid-the so-called collection programs. Other programs include traditional face-to-face audits of taxpayer records, whether at an IRS office or at the taxpayer’s home or business, correspondence audits, and document matching.
- IRS enforcement resources declined sharply in the late 1990s, as funding shifted toward greater emphasis on taxpayer services. Enforcement spending is starting to increase but is still below mid-1990s levels in wage-adjusted dollars, while both the number of tax returns and the complexity of the tax law have increased.
- The IRS promotes voluntary compliance by raising the cost of tax evasion and, through taxpayer services, making it easier for honest taxpayers to fulfill their responsibilities.
- IRS data suggest that about four dollars, on average, is recovered in direct enforcement revenue per additional dollar spent on enforcement.
- Some research findings suggest that increased enforcement produces gains from improved voluntary compliance that far exceed the direct revenue that these programs bring in, but the actual amount is hard to quantify.