According to an Internal Revenue Service (IRS) study of 2001 returns, the government is failing to collect $290 billion of tax revenue that is due each year The AICPA, in on Taxation a letter to the Joint Committee said it supports the committee’s efforts “to identify constructive ways to close the tax gap.”

The AICPA weighed in on proposals to impose basis reporting requirements for publicly traded securities and to deny deductions and credits with respect to untimely returns of nonresident aliens and foreign corporations. Another proposal involves expanding the reporting requirements for real estate taxes, the proceeds of auction sales, mortgage interest, and individuals with an interest in offshore bank accounts and offshore trusts.

The National Taxpayer Advocate Nina E. Olson last week called the tax gap one of the most serious taxpayer problems in her annual report to Congress.

Olson, who works independently within the IRS, said that she is pleased that Congress is paying more attention to the issue, but honest taxpayers may become less compliant over time if the tax gap is not closed.

“If we divide the estimated $290 billion net tax gap by the roughly 30 million individual income tax returns filed, we can see that each return was effectively assessed a ‘surtax’ of more than $2,200 to subsidize noncompliance by others. That’s an extraordinary burden to expect the average taxpayer to bear,” the report said. “Nobody likes to feel like a ‘tax chump.’ ”

The biggest reason for this tax gap is the under-reporting of income, but not all of it is intentional, Olson said. To close the gap, she recommends a number of things, including a move toward fundamental tax simplification, greater third-party information reporting, and better IRS compliance efforts that respect taxpayer rights.