A significant amount of money is going to be transferred to the Internal Revenue Service very soon. As part of the new climate and health care plan, the tax collecting agency is expected to receive $80 billion over the next decade.
Some of that money will be used to replace outdated computer systems, and some of it will be used to improve customer service, such as on the IRS phone line, which now answers only one out of every ten calls.
According to Scott Horsley of NPR, the majority of the money is going toward increased enforcement to assist the Internal Revenue Service in collecting taxes that people have not been paying.
SCOTT HORSLEY, BYLINE: According to estimates provided by the Treasury Department, approximately $600 billion in federal taxes are not paid each year.
The majority of this sum is owed by wealthy taxpayers who underreport their income. It’s about time, according to the tax policy counsellor at the Treasury Department, Natasha Sarin, for there to be some new tax officers on the beat.
NATASHA SARIN: If you strengthen the Internal Revenue Service’s (IRS) ability to pursue affluent individuals who evade paying taxes, you will be able to collect at least 400 billion of that over the next ten years, and I expect you will collect much more than that.
HORSLEY: Because of the continually decreasing number of IRS audits, tax evaders have faced a much-reduced likelihood of being discovered in recent years.
There was complete unanimity among Republican lawmakers when it came to their opposition to greater spending for enforcement. Senator Ted Cruz from Texas said in an interview with Fox Business that his constituents have not been demanding more IRS inspectors.
Imagine a swarm of IRS officials descending upon the United States of America like locusts, says Ted Cruz. Also, just so you know, the purpose of these IRS officers is not to target extremely wealthy individuals.
They are in that location to hunt you down. They intend to take advantage of your locally owned and operated company. They intend to harm your loved ones if they have the chance.
HORSLEY: However, the Secretary of the Treasury and the Commissioner of the Internal Revenue Service (who was appointed by Trump, by the way) claim that increased enforcement efforts will not target taxpayers in the middle class. Fear-mongering, according to Sarin, is all that Cruz and other Republican opponents are doing.
SARIN: I think it’s important that we have a very clear understanding of what these resources are and are not accomplishing.
These resources are not increasing the number of audits on any small businesses or on any households that have an annual income of fewer than 400,000 dollars.
HORSLEY: The extra financing will assist in reversing the underfunding that has plagued the Internal Revenue Service for more than a decade.
Since 2010, the agency’s enforcement ranks have been reduced by thirty per cent. Even though low-income people only account for a small fraction of tax debt, the Internal Revenue Service has increasingly focused its attention on audits that involve lower-income households since they are easier to conduct.
According to Susan Long, a researcher at Syracuse University, 46% of the audits conducted in the previous year targeted individuals who get a specific tax benefit for working-class families.
SUSAN LONG: The levels of enforcement have significantly decreased, except for the poorest and lowest-income category, for whom you can simply put the letter in the mail. They are not difficult to mark.
HORSLEY: Meanwhile, according to Long, the Internal Revenue Service (IRS) audited only 2.2% of the tax returns of millionaires in 2016, a significant drop from 2015.
LONG even though every study shows that returns are where the money is, the majority of millionaires don’t even bother to look at their own returns.
HORSLEY: Yes, it’s true that the overwhelming majority of people who earn an average wage already pay the taxes that are due on their income.
Because their income is reported directly to the IRS, they do not have many options to choose from. The likelihood of payment is significantly reduced for high-income taxpayers whose income comes from obscure sources.
They have the option of hiring attorneys and accountants to assist them in avoiding the tax collector. And according to Sarin, the Internal Revenue Service has been outgunned up to this point.
SARIN: For a very considerable amount of time, we have been engaged in a fight between David and Goliath. Finally, we are providing the Internal Revenue Service with the resources it requires to be able to effectively police tax evasion at the highest levels of the distribution.
HORSLEY: According to Sarin, that will not only make it possible for the Internal Revenue Service (IRS) to collect more money for the government but will also result in a more equitable tax structure.
SARIN: This is about putting an end to a two-tiered tax system in which some taxpayers have the opportunity to evade taxes while other taxpayers are making good on their obligations and are fully and voluntarily compliant. The latter group makes up the vast majority of taxpayers.
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HORSLEY: According to Sarin, the chance of being audited should decrease for persons in the middle class who are already paying what they owe and who have a good payment history.
