The Internal Revenue Service is making headway on closing the estimated $345 billion tax gap, and doing so in dramatic fashion both at home and abroad. In the U.S., marked increases in seizures, liens and levies have come at a time when taxpayers are already struggling with a down economy. Overseas, the agency has increased the number of agents, and strengthened its fight against overseas tax evasion. This more aggressive tactic is further evidence that as the government searches for dollars under every stone, the IRS has stepped up its game. For taxpayers and those of us who represent their interests, this means even greater vigilance and attention to compliance.
The IRS is arguably one of the most successful departments in the federal government, and it has the results to prove it.
In fiscal year 2010, the number of liens issued by IRS tax collectors increased by 14 percent, while liens issued by the agency’s Automated Collection System jumped 13 percent, according to a recent report by the Treasury Department’s Inspector General for Tax Administration. Likewise, the total number of levies increased by 4 percent during fiscal 2010, which included a 73 percent increase in levies issued by the Collection Field function to 667,322. While that increase was partially offset by a 5 percent decrease in levies issued by the Automated Collection System to 2.9 million, the numbers are still impressive.
In FY 2010, the IRS collected $2.345 trillion in taxes (gross receipts before tax refunds) or 95 percent of federal government receipts, according to the 2012 IRS budget request to Congress. The agency also examined more than 1.58 million individual returns, an increase of 11 percent, the highest level in the past decade. It increased high-income/high-wealth audits on taxpayers with income greater than $200,000 by 5.5 percent and audits for those with income greater than $1 million by more than 8 percent. The department also increased collection case closures by 6.3 percent and criminal investigations by 12.4 percent.
On Sept. 15, the agency announced that its 2011 offshore voluntary disclosure program, completed Sept. 9, increased total voluntary disclosures to 30,000 since 2009. Voluntary disclosure programs allow taxpayers to become compliant, pay what they owe and avoid criminal penalties. The 2009 program, which ended Oct. 15, 2009, brought in 15,000 voluntary disclosures and another 3,000 who came in after the deadline. Some 12,000 new applications came in as a result of the 2011 program, bringing the number to 30,000 so far. Additional applications are still being counted. The IRS collected $2.2 billion in taxes, interests and penalties from the 2009 cases, involving bank accounts in 140 countries. So far the 2011 program has garnered $500 million in payments, bringing the total collected through IRS offshore programs to $2.7 billion.
“By any measure, we are in the middle of an unprecedented period for our international tax enforcement efforts,” said IRS Commissioner Doug Shulman. “We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion.”
According to the agency’s FY 2012 budget request, the IRS more than doubled its offshore presence by opening new offices in Asia and Central America, placing additional law enforcement personnel at its existing offices throughout the world and expanding its interaction with key international organizations involved in tax and financial law compliance.
These numbers are a good return on investment, which has kept the IRS budget steady. President Obama’s FY 2012 budget calls for a funding increase of $1 billion for the IRS to $13.2 billion. In the event that its enforcement budget is cut, the agency may use automated systems, which have already proven to be successful. One way or the other, these statistics are impressive, and increase the odds of being caught in the agency’s global dragnet.
Stanley Foodman, CEO, Foodman CPAs & Advisors is a recognized forensic accounting and litigation support practitioner, specializing in international tax. A pioneer in the field, he has served as an expert witness and forensic accountant for some of the nation’s most complex, high-profile economic crime cases. Mr. Foodman is a former auxiliary special agent for the Florida Department of Law Enforcement with specialization in economic crime – money laundering, bank fraud, public corruption and discovery of hidden assets. He serves on the advisory board of the International Association for Asset Recovery (IAAR).
Foodman CPAs & Advisors is a full service accounting and litigation support firm, specializing in forensic accounting and international tax. One of the top 25 accounting firms in South Florida, Foodman represents clients locally, nationally and internationally.