Staff reductions and other cutbacks at the IRS have resulted in fewer audits, which in turn have resulted in fewer taxpayers paying their full share, according to former IRS Commissioner, Donald Alexander. "The more the IRS fails to enforce the law the more people take advantage of that failure," Mr. Alexander said.
Three areas are cited as being responsible for the potentially billions of dollars not being turned over to the IRS:
- Taxes due on income that's underreported on income tax returns
- Tax liability on income earned by taxpayers who fail to file tax returns
- Taxes due on income reported on tax returns, but not paid
The Taxpayer Compliance Measurement Program, TCMP, a program that used to orchestrate random audits for purposes of encouraging compliance, among other reasons, was last used in 1988. A plan to revive the program in 1995 was squelched after Congressional hearings on taxpayer abuse by the IRS.
Recently, the IRS has chosen to use its manpower to focus on two main taxpayer noncompliance issues - abusive tax shelters and the confusing earned income tax credit.