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The Widening of the Tax Gap is the IRS’s Fault, Says the IRS

Posted on by Going Concern News Desk

Accounting Today reported on Friday:

The estimated gross U.S. tax gap increased to $496 billion annually for tax years 2014 through 2016, a rise of over $58 billion from the prior estimate — and the Internal Revenue Service estimates the gross tax gap will rise to $540 billion for 2017-2019.

“The increase in the tax gap estimates reflects that the IRS needs to do more, both in improving taxpayer service as well as working to improve tax compliance,” said outgoing IRS Commissioner Chuck Rettig in a statement Friday. “The recent funding addition will help the IRS in many ways.”

The gross tax gap is the difference between estimated true tax liability for a given period and the amount of tax that is paid on time. The gross tax gap comprises nonfiling (taxes that were not paid on time by those who do not file on time — $39 billion); underreporting (taxes understated on timely filed returns — $398 billion); and underpayment (taxes that were reported on time, but not paid on time — $59 billion).

Maybe that militia of ravenous IRS agents the agency is putting together will scare Americans into compliance and the tax gap will start to close in future years? Nah, probably not.

Estimates of the tax gap keep growing [Accounting Today]

Related article:

Anyone Looking Forward to a Highly Militarized IRS SWAT Team is Going to Be Sorely Disappointed

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Just when you thought things couldn’t get more exciting in the world of overeating, Dairy Queen has announced that it will be handing out free ice cream in front of the IRS Building in DC tomorrow at 10th St. and Pennsylvania Ave. NW.

According to the Washington Business Journal, the Blizzardmobile will be parked outside and mini blizzards will handed out to “taxpayers and accountants” (why didn’t they just say “everyone”?).


This momentous occasion not only marks the end of the traditional return filing season but it is also marking the Blizzard’s 25th birthday. This might, just might, cajole some Tea Partiers to leave their homes as opposed to marching on the Internet (especially since there doesn’t appear to be a limit per taxpayer/accountant).

However! The window of opportunity is short and you’ll only have from noon to 1 pm to get your miniature cup of refined sugary goodness. One might think that since Doug Shulman might be anti-pizza that he also might have something against blended ice cream confections. But on the other hand, Warren Buffet didn’t get filthy rich by giving away crackalicious deserts for free now, did he?

Free ice cream outside IRS building [Washington Business Journal]

IRS Database Security Could Use a Tuneup

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The Latest Feel Good Story Involving the IRS

Thumbnail image for IRS_logo-thumb-150x140.jpgWere you concerned that the IRS wasn’t auditing enough poor people? Well here’s a story that will put those fears to rest: The IRS audited a woman in Seattle who made less than $19,000 a year because she was too poor.
Rachel Porcaro was summoned to the IRS after being flagged for an audit. She was told that based on what she was earning, she couldn’t possibly be supporting herself and her two sons:

“They showed us a spreadsheet of incomes in the Seattle area,” says Dante Driver, an accountant at Seattle’s G.A. Michael and Co. “The auditor said, ‘You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle.”
“They thought she must have unreported income. That she was hiding something. Basically they were auditing her for not making enough money.”

Initially, the Service told Ms. Porcaro that she owed the Feds $16,000. When Dante Driver sent a letter to the IRS explaining how he thought the code was being wrongly interpreted, the IRS turned around and audited Ms. Porcaro’s parents:

Rob and his wife, Patty, had to send in house blueprints, bank statements, old utility bills. Rachel was asked to prove her children were hers, as well as document the money she’d spent on her children’s clothes, health care and so on.
They racked up $10,000 in accountant bills — $8,000 of which Driver is trying to recover from the IRS.
In the end, the parents were cleared. The IRS also backed off trying to reclaim Rachel’s earned income tax credit.

Ultimately, Ms. Pacaro had to pay over $1,400 in back taxes, penalties, and interest because she couldn’t provide enough receipts to document that she could claim her sons as dependents. Her parents are also not allowed to claim them as dependents, so for tax purposes, the two boys simply don’t exist.
Even if you’re a stickler for tax law, the time and expense of this audit hardly seems worth $1,400. The IRS soldiers likely would claim that they were just following orders but the Service was mum on this story. You can safely bet they won’t be apologizing either. The moral seems to be, regardless of your income, keep those receipts people. Yeesh.
$10 an hour with 2 kids? IRS pounces [Seattle Times/Danny Westneat via The Consumerist]

One thought on “The Widening of the Tax Gap is the IRS’s Fault, Says the IRS”

  1. How do we know the “tax gap” is $496 billion per year? Because the IRS said so. Could the IRS have disclosed this “gap” to provide a rationale to increase its budget? Why is any IRS number accepted uncritically?

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