A major focus of the Obama Administration has been to reduce the “tax gap” (the difference between the amount of taxes reported and what the government actually collects). Nowhere has this become more obvious than with the President’s 2013 budget request. A recent article in OMB Watch entitled Obama Proposes Exempting IRS from Budget Caps, reports on the Administration’s request to have some IRS enforcement spending be “excluded” from budget caps set in 2011. The Administration is making the case that several IRS enforcement efforts are working and generating revenues beyond their costs and that every dollar spent on tax collection pays for itself.
The IRS enforcement budget falls under “discretionary spending” and is subject to spending caps under the Budget Control Act conceived as part of the 2011 debt ceiling deal. The Administration is asking that current caps placed on the IRS enforcement budget be lifted and that this enforcement budget not compete with other national priorities for funding.
The latest IRS tax gap report (January 2012) showed that American taxpayers under reported their taxes to the tune of $450 billion dollars in 2006; and increase of $105 billion from the last IRS study in 2001. This discrepancy is not sitting well with the current President and Treasury Department looking to fill revenue gaps anywhere they can. According to the OMB Watch article, the Obama administration is seeking $5.7 billion for the fiscal year 2013 IRS enforcement budget, showing a $402 million increase over current fiscal year estimates.
Below are the recommended enforcement programs President Obama wants to increase funding for:
- Offshore Tax Evasion Efforts = to receive an additional $111 million. The IRS estimates will bring in $6.40 for every dollar invested by fiscal year 2015.
- International Business Tax Code Compliance = to receive an increase of $39 million to hire more international technical specialists to review business tax returns. The IRS estimates the return on investment at $8.80 per dollar invested.
- Implementation of Recent Legislative Changes to the Tax Code = to receive an additional $129 million including the new reporting requirements and certain provisions of the Affordable Care Act (ACA). IRS estimates the return will bring in $3.50 for every dollar invested.
- Revenue Protection Strategy = to receive an increase of $88 million. This “strategy” allows the IRS to adjust a taxpayer’s refund if examiners find errors. The IRS estimates a return of $1.90 per dollar invested in fiscal year 2015.
- Continuation of Tax Preparer Certification = to receive an additional $35 million. The IRS estimates will bring in $2.30 for every dollar invested by fiscal year 2015.
This news offers a cautionary tale. Increased IRS funding will ensure that IRS collection efforts will only increase in size and scale. If you are a taxpayer experiencing IRS tax issues, you are advised to get expert tax resolution advice to resolve them soon before the IRS gets even more powerful and more expensive.
More Tax Help, IRS News and Tax Relief Tips:
- Offshore Tax Evaders Get Preferred IRS Help
- Doctor Sentenced for Failing to File FBAR Reports
- Treasury Proposes Multilateral Agreement for Offshore Compliance
- Delinquent and Unfiled Tax Returns? 8 Steps to Resolving Them
- IRS Help for Americans with Foreign Income
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