Posted on 06/07/2007 10:10:37 AM PDT by Moose Dung
IR-2007-113, June 6, 2007
WASHINGTON — Internal Revenue Service officials today announced plans to launch a new National Research Program (NRP) reporting compliance study for individual taxpayers that will provide updated and more accurate audit selection tools and support efforts to reduce the nation’s tax gap.
The latest NRP study will be the first of an ongoing series of annual individual studies using an innovative multi-year rolling methodology. The study will start in October 2007 and examine about 13,000 randomly selected tax year 2006 individual returns. Similar sample sizes will be used in subsequent tax years.
An advantage of using this method, which combines results over rolling three-year periods, is the IRS will be able to make annual updates to compliance estimates and develop more efficient workload plans on an annual basis, after the initial three annual studies. Previous studies started from scratch, drew tax returns from a single tax year and involved examinations of more than 45,000 taxpayers.
“The new program will be a big step forward for tax research,” said Acting IRS Commissioner Kevin M. Brown. “Our approach will reduce burden on taxpayers, improve our audit selection techniques and give us more timely information to help reduce the tax gap.”
The tax gap is the difference between what taxpayers should have paid and what they actually paid on a timely basis. Based in part on the prior NRP reporting compliance study of individual income tax returns, IRS officials estimate that the net tax gap for tax year 2001 was $290 billion.
Using research from the prior NRP study, the IRS updated its audit selection system. Updated statistics enable the IRS to audit more efficiently and improve the detection of underreported income and overstated deductions and credits. The data also enables the IRS to audit fewer taxpayers with accurate tax returns, which lessens the burden on compliant taxpayers.
The research on individuals needs updating because as time passes, patterns of noncompliance change. The sample for the latest individual NRP is constructed to ensure that it contains sub-samples of individuals at different income levels as well as those engaged in farm and sole proprietor business activities.
The initial group of taxpayers whose returns are selected for audit under the new NRP study will start receiving official letters in October informing them that they are part of the research study. The majority of individuals will have specific lines of their returns confirmed through in-person audits with an IRS examiner. Some of the individuals whose returns are selected for inclusion will not be contacted if the IRS can obtain matching and third-party data that confirms the accuracy of their return. The targeted research design of the new individual NRP avoids the need for IRS agents to routinely check all the lines of a taxpayer’s return.
In addition to the NRP for individuals, the IRS is in the final stages of a compliance research project examining reporting compliance of S corporations. This research encompasses approximately 5,000 returns filed for tax years 2003 and 2004. Since the income and expense items for S corporations flow through to individual shareholders, this study will also help refine the tax gap estimates for individual income tax.
Does it say ANYTHING about tracking illegal alien tax fraud. Millions of dollars are wired to Mexico tax free. Maybe just law abiding citizens are held accountable.
No. Nothing about illegal aliens. This effort is targeted at the average citizen. Criminals are too hard to catch...it’s easier for the IRS to beat-up on regular folks.
dung.
I read somewhere over a year ago that the IRS was going to focus more on small businesses because they felt they were missing a lot there. This doesn't strike me as any new revelation.
The thing that really steams me about this is that the IRS is stepping up its DATA MINING and PROFILING to catch regular US citizens that actually file returns and pay taxes.
But, heaven help us if we use these tactics to track terrorists, secure our borders, or make air travel more safe and convenient!
dung.
No it’s not a new revelation. The revelation is what they are NOT focusing on...thieves, drug dealers, smugglers, illegal aliens, money laundering, etc.
The focus of this program is on regular folks that file and pay taxes. That’s their #1 target.
Try starting a new business. Mortgage your house. Go into debt up to your eyeballs to get your dream off the ground. Work 18 hours a day, 7 days a week. But by God you better make sure Uncle Sam gets 100% of his due or they’ll come shut you down.
dung.
Should the honest business man who pays his taxes be penalized because the guy across the street can undercut him because he has lower costs due to hiding his income from the government?
The data also enables the IRS to audit fewer taxpayers with accurate tax returns, which lessens the burden on compliant taxpayers.
Translation: FEWER ACTUAL AUDITS
No one is advocating the non-payment of taxes. The reason I posted this is that as a “tax guy” I see the reach of the IRS (and state tax authorities) growing at an alarming rate so they can increase revenues without “raising taxes”.
More mandatory reporting, more audits, greater efforts to turn our “voluntary” tax system (which boasts the highest compliance rate in the world) into a larger, more expensive and more intrusive bureaucracy.
The tax authorities are more interested in whether you properly report the income you made on your garage sale than the $1MM cash from cocaine sales that just slipped across the border.
dung.
Sorry, I disagree.
This will mean fewer “non-productive” audits — audits that don’t generate a payout for the IRS.
dung.
That's one lottery you don't want to win.
Of course this only applies to law abiding citizens never to Jorge’s Mexican CRIMINALS....................
I know. I left my cushy corporate job 2 years ago to start my own business (moved out of Los Angeles too so I could afford to live while doing so).
There is always a line between enforcing the law and abusing the citizenry.
What we are seeing here is not about addressing the issue of tax evasion. It is about increasing revenues.
It is expensive and unprofitable for the IRS to pursue criminal activity. Often the government winds up with crooks behind bars and little or no money recovered.
These new “enforcement” initiatives are designed to address the “tax gap.” Not crime. It is about squeezing more coin out of the average citizen through increased surveillance and intrusion into our individual financial lives.
And that should concern everyone.
dung.
I think I'd just give up and tell them to send me the bill. I'm not even thinking about how to justify business trips from 3 or 4 years ago.
How would you do that?
You don’t.
From the IRS’ point of view that would be a “productive” audit. They send you a letter that asks for the documentation to substantiate a deduction on your 2003 tax return or pay the bill.
The computer generates the letter, the IRS gets a check.
The 13,000 randomly selected tax returns are used to identify the “profile” of the taxpayers most likely to convert into productive audits. This is not the number of audits to be done.
Another initiative underway at the IRS right now is to have Visa/MC/Amex/Discover transmit all their transaction data to the IRS for data mining.
dung.
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