Tax News

CCH (cch.taxgroup.com) reports:

IRS Deputy Commissioner for Operations Support Linda Stiff testified before the House Budget Committee on July 17, discussing the program integrity cap adjustment to the IRS's fiscal year (FY) 2008 budget. According to Stiff, more resources will yield more revenue, increase voluntary compliance and reduce the tax gap, resulting in a significant return on investment.
FY 2008 Budget
Stiff reported that the FY 2008 budget proposes a program integrity cap adjustment of $406 million to assist the IRS. Of that amount, $115 million is intended to assist the IRS in maintaining its FY 2007 base enforcement levels, adjusting for pay increases and inflation. The remaining $291 million is intended to support the IRS's initiatives aimed at increasing taxpayers' voluntary compliance and reducing the tax gap. "This budget will allow us to continue to balance a strong taxpayer service program with an equally effective enforcement effort," Stiff stated, adding, "This balance is important for effective tax administration."
Enforcement Initiatives
The initiatives Stiff outlined are aimed at improving voluntary compliance by increasing "front-line" enforcement resources, implementing legislative and regulatory changes, and expanding the IRS's research program. Stiff's written statement described the following initiatives:
--Increased audits of high-risk tax returns, collecting unpaid taxes listed on tax returns and investigating tax evaders for possible criminal referral among small business and self-employed taxpayers;
--Increased examination coverage for large complex business returns, foreign residents and smaller corporations with significant international activity; and
--Increased coverage in the automated under-reporter program by minimizing revenue loss.
Return on Investment
Stiff estimated that these enhanced enforcement efforts would create a return of investment of $13 to $14 for every additional $1 invested, with the full benefits realized after three years. This does not include the amount of tax that will continued to be collected due to the deterrent effect the Service's efforts could have on potential tax evaders. "It is important that we have the resources to enforce the existing laws in ways that do not fundamentally change the manner in which we interact with taxpayers," Stiff emphasized.
By Torie Cole, CCH News Staff