Results are in from AICPA tax gap survey

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The American Institute of Certified Public Accountants has issued the results of its Internet-based membership survey regarding the federal tax gap. The AICPA surveyed 1,290 participants in an effort to gain a better understanding about the tax gap. Survey results from the nearly 1,300 CPAs responding provide such insight into the tax gap as that over 48 percent of respondents identified the experience of a traumatic event in taxpayers' lives as the reason that taxpayers fail to file returns.

In addition, more than 48 percent of respondents believe small businesses and self-employed taxpayers are largely responsible for the tax gap. Nearly 55 percent believe the underreporting of income contributes most to the tax gap. Furthermore, more than 48 percent believe taxpayers who contribute to the tax gap are intentionally disregarding the law.

Here are the complete results of the survey:

Most responsible for creating the tax gap:

  • 48.7% believe small business and the self-employed are responsible.
  • 15.2% believe individuals are responsible.
  • 11% believe large companies are responsible.
  • 25.2% believe other types of taxpayers are responsible or don't know.

Activities that are major component of the tax gap:

  • 54.9% believe the underreporting of income is the major component.
  • 21.3% believe that the overstatement of deductions is the major component.
  • 12.3% believe the act of not filing returns is the major component.

Primary contributor to the tax gap:

  • 48.4% believe that the intentional disregard of the law is the primary contributor.
  • 28.1% believe it is the complexity of the law/constant changes in the law is the primary contributor.
  • 14% believe competitive pressures within certain industries is the primary contributor.
  • 1.3% believe honest errors/mistakes is the primary contributor.

Experiences with clients/potential clients that have not filed a Form 1040 for several years.(Some respondents selected more than one answer under this question.)

  • 48.5% believe taxpayers often fail to fail due to a traumatic event, and then continue to be a non-filer because their fear the consequences of being a non-filer.
  • 33.4% believe taxpayers are primarily motivated to become compliant because of some recent IRS activity or publicity.
  • 21.1% believe that a taxpayer remains a non-filer because the taxpayer starts believing that either he is not required to file or thinks he will never be caught.
  • 13.6% don't accept non-filers as clients, so they didn't have a response to question.

Respondents' Profile:

1290 Respondents – As of June 11, 2007

Type of organizations respondents work for:

  • 75.1% work for an accounting firm.
  • 14.8% work for business and industry.
  • 1.8% work for academia.
  • 8.3%-other or unidentified.

Number of accounting professionals work for the organization (where respondent works):

  • 27.7% of respondents are self-employed.
  • 41% work in an organization with 2-10 professionals.
  • 15.2% work in an organization with 11-50 professionals.
  • 14.2% work in an organization with 51 or more professionals.
  • 1.9%-other or unidentified.

Age of respondent:

  • 5.8% -- Under 35 years.
  • 13.7% -- 35-44 years.
  • 36.2% -- 45-64 years.
  • 33.8% -- 55-64 years.
  • 10.5% -- 65 years or older.

*For the questions where the responses don't add up to 100 percent, there were situations where the respondents didn't know or didn't provide an opinion, or the number was an insignificant percentage when tabulated.

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