The tax gap is widening, with the amount of taxes going uncollected figured to be as much as $1 trillion or more yearly — including as much as $175 billion in underpayments among the richest Americans.
In testimony before the Senate Finance Committee on Tuesday, IRS Commissioner Chuck Rettig revealed the troubling estimate based on figures from 2011-13— which goes well beyond the IRS’ official $441 billion difference between taxes paid and taxes owed annually, known as the tax gap, Politico reported.
Rettig explained that a number of factors suggest the projected tax-gap rise — including increased virtual currency holdings — that weren’t factored into the 2011-2013 period now amount to more than $2 trillion worldwide, Politico reported.
And he told the Senators counting foreign-source income and illegal-source income would increase the tab — and that IRS research indicates there’s $175 billion in underpayments among the wealthiest U.S. taxpayers.
In all, he told the committee, it wouldn’t be over-the-top to expect the tax gap “could approach and possibly exceed $1 trillion per year,” Politico reported.
Sen. Rob Portman, R-Ohio, said at the hearing he’s working on a bill to define virtual currency for tax purposes and improve information reporting on it, Politico reported.
Finance Committee chair Sen. Ron Wyden, D-Ore., wanted to know what changes in law and regulations could improve the tax gap situation.
Rettig replied that better information reporting from third parties would help the IRS boost collections. He also called for for more electronic tax return filing, error correction authority for the IRS, and regulation of tax return preparers, in addition to requesting sustained budget improvements, the news outlet reported.
President Joe Biden has proposed a 10.4% increase in spending on the IRS, with most of the additional money tabbed for enforcement. Rettig admitted IRS is currently “outgunned” in trying to keep pace with all tax avoidance and cheating.
According to Politico, enforcement and collections aren’t the only mandates for the IRS; the agency has issued billions of dollars in economic relief Congress authorized to help individuals and businesses amid the coronavirus pandemic and has been given responsibility for delivering annual child tax credit payments more frequently throughout the year, beginning July 1.
It has been a concern for Republicans, Politico reported.
“To date, absent any contrary indication from the IRS, I am left with the impression that the aggressive July 1 payment deadline imposed by Congressional Democrats will be challenging to meet by an IRS staff that is already stretched thin, without cutting corners or reassigning staff who should be focused on processing tax returns,” Sen. Mike Crapo, R-Idaho, said at the hearing, Politico reported.
Source: Newmax
