There's no question that the tax gap is real. The IRS estimates that almost 20 percent of the total tax liability of the nation goes unpaid every year by individuals and businesses that underreport income. Hundreds of billions of tax dollars never get paid. The 1099 reporting rule was designed to combat this shortfall, and the IRS has been given authority to hire enough people to process all of the additional paperwork and go after the taxpayers who are not paying their fair share of tax.
If the 1099 reporting rule is too difficult to follow, what alternatives do we have? Public humiliation for those who get caught underreporting isn't really our national style, although some sort of scarlet letter displayed by tax dodgers might be effective. Another alternative is to stop taxing businesses altogether. Businesses pass the cost of tax to consumers through higher prices for products and services, so the consumer ultimately pays the tax anyway. Is it time to remove corporate (all?) income tax and give serious thought to a national sales tax?.
Gail Perry, Editor-in-Chief