March 2017 JD Supra
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Voluntary compliance is the foundation of our US tax system. Taxpayers determine the correct amount of their tax and complete appropriate returns, rather than the Government determine their tax for them. According to the Internal Revenue Code (the law of the land), Taxpayers have three obligations: (1) to file timely returns; (2) to file accurate returns; and (3) to pay the required tax voluntarily and timely.

In spite of its recent budget cuts and fewer resources, IRS remains focused on its mission to enforce US tax compliance. According to IRS, enforcement of tax laws promotes compliance.  It provides the US taxpaying population with the confidence that all individuals are paying their fair share.

This is why the IRS will not quit:

  1. The Tax Gap:  The difference between what Taxpayers owe and the amount of IRS collections. It exists because Taxpayers don’t file tax returns, underpay their taxes, underreport income and international non-compliance.  According to the US Treasury “an unacceptably large amount of the tax that should be paid every year is not, forcing compliant taxpayers to bear a disproportionate share of the revenue burden, and giving rise to the “tax gap””.  IRS recognizes that 100% voluntary compliance is not real and it is targeting 86% for 2017.
  2. Congress:  According to Congress, the main mission of IRS is enforcement and tax compliance.  The largest component of the IRS budget is spent on enforcement.
  3. Enforcement Revenue:  Despite the fact that IRS funding dropped $900 million – between FY2010 and FY2015 – the Agency generated increasing enforcement and service Revenue through 2014 (it decreased by 5% in 2015).
  4. The people they haven’t caught yet:  Approximately 7.5 Million individuals according to IRS matching via W-2’s and 1099’s, and 24 Million returns that are mismatched.
  5. It can rely on automated information:  IRS has automated internal systems.  IRS Notice CP2000 is an automated under reporter notice that questions tax returns when the tax returns don’t match the IRS income information on hand.
  6. Penalties:  The Internal Revenue Code has over 150 types of penalties.  The most popular penalties are: failure to file, failure to timely file, failure to pay, accuracy related penalties, unpaid withholding taxes, failure to provide foreign information and tax fraud.

Don’t be a victim of your own making.  Although there must be a balance between its enforcement activities and imposing an unreasonable Taxpayer burden, the IRS will not quit!    IRS has a commitment to service US Taxpayers and enforce collections compliance.