IRS Tax Gap...why not hire a LOT more investigators?

[beagledave]

Listening to NPR this morning…apparently the tax gap is now almost $300 billion, yes billion. This gap, of course, is the difference between what is owed by tax payers and what is collected.
http://money.cnn.com/2005/03/29/pf/taxes/tax_gap/

The head of the IRS mentioned that they are now focusing more on enforcement…but seemed to imply that they have limited resources.

I guess an obvious question for me is…why don’t they hire a LOT more investigators.

Yeah they are increasing funding…but why not a lot more?

Hell 10% of that tax gap would fund a lot more investigators…hardware etc… Up to a point, it would seem that any more money invested in investigators would be more than made up by increased collections. I’m sure that there is a point of diminishing returns, but I have a hard time believing that the IRS is near that point.

Or am I wrong?

Is this a PR issue…with a perception of too many investigators being a political liability?

[jesuslynch]

Mostly a PR problem in my opinion. The general public thinks more Revenooers is a bad thing.

This article goes a little further into detail about the problem.

[beagledave]

@jesuslynch

Mostly a PR problem in my opinion. The general public thinks more Revenooers is a bad thing.

This article goes a little further into detail about the problem.

Well thats what I suspect…but when he says

The IRS has 15,000 fewer workers than it had 10 years ago, Rossotti says. During the same period, the economy has grown significantly and is much more complex. “There just aren’t enough resources to even tackle the most serious abusers,” he says.

The mind boggles. Would there be a PR problem if they went after “the most serious abusers” by significantly increasing the resources?

[silenus]

In the words of a famous city administrator…comparing it to milking a cow…

“The object of taxes is to get the maximim milk with the minimum moo.”

More investigators = more moo.

[CalMeacham]

Where have you been? I’s long been charged that the current administration has been underfunding the IRS:

What happened to tax enforcement? It has been crippled by four overlapping assaults. In the 1990s, legitimate concern about a few overzealous prosecutions led Congress to create new “taxpayer rights” that hobbled legitimate tax collection. The Republican-led Congress underfunded the IRS, and the Bush administration has steered its audit efforts away from corporations and the wealthy. New loopholes written into the tax code made it easier for legitimate tax-avoidance maneuvers to slide into illegal – but hard to uncover – tax evasion. And the use of foreign tax havens became ever more brazen.

[beagledave]

@CalMeacham

Where have you been? I’s long been charged that the current administration has been underfunding the IRS:

I know that this is nothing new…today’s date and the interview on NPR made the topic more topical.

I’m guessing that the real answer (if there is one) to this question might lie in Great Debates

[19ForMe]

People that are good with accounting, law and investigation work are hard to find. The private sector will pay more. Some bright kid gets out of college / law school with a mound of debt and dreams of a good life. The IRS is not the first place that leaps to mind.

The IRS has not historically been the best place to work. The training can be lacking. The pay is based a years and grade instead of performance. Given that, it will be hard to catch up even if they begin to hire.

A modestly trained investigator will do just fine looking at the local bar to determine if the revenues reported are seriously short of cash. That same guy will have problems looking at Enron’s mountain of data to determine if one of its dozens of cayman companies is outside the bounds of the law. Take a look at the job descriptions. Then take a look at the pay grades.

If you are a GS-13 “Financial Products and Transactions Examiner,” your pay ranges from $64,478 to $83,819k (before adjustment for location). If you are any good, your skills would be worth a fortune outside the IRS.

They don’t need warm bodies. They need talented people. Not sure where they’d find them without raising pay substantially.

[Debaser]

CalMeacham: What cite did you get that quote from?

From the OP’s cite:

In his 2006 budget, President Bush requested an additional $500 million be devoted to IRS enforcement efforts, which is a 7.8 percent increase over the $6.4 billion spent last year.

I’m also slightly horrified by the story of Eric Delore at the end of the other article. As long as outragous abuses of law abiding taxpayers like that can happen I won’t have much sympathy for the IRS. The guy didn’t do anything wrong and now owes $400,000 for money he never made. The government is forcibly taking his income, bank accounts and his house. This is outragious.

[CC]

And there does seem to be a mentality in government that when a problem gets larger, the way to address it is to cut payroll. Remember when Reagan reduced the number of welfare case workers because of a handful of highly publicized cheaters. In the end, fewer people who needed services got them, but the public view of it all was that spending less money on this egregious problem would make it go away. I don’t want to provoke a debate on the issue, but it would seem that, at least in the arena of social services, more people can do their jobs more efficiently, ultimately reducing waste and helping more people in the long run if the number of workers is increased rather than decreased. I.e. it is very much a p.r. deal. If it were possible for the average U.S. citizen to look at an IRS case worker as someone who will help them with their return rather than as an adversary, my WAG is that collections would, in fact, rise. But that won’t happen unless there are a whole lot more of these people working. xo C.

[beagledave]

@19ForMe

They don’t need warm bodies. They need talented people. Not sure where they’d find them without raising pay substantially.

You’d think a $300 billion bounty might be able to provide for some of that
pay raise

[samclem]

Moved to Great Debates from GQ.

This one has factual answers, too, but can be answered better here I think.

samclem GQ moderator

[DanBlather]

If I remember right, Reagan cut IRS workers to “save money”. I think paying workers some percentage of what un-paid taxes they uncover would allow us to hire qualified people. Sometimes i wish the govt worried more about being “fact-based” than “faith-based”.

[Hammer]

Depends on the real nature of the problem. Is it a few hundred corporations grossly underpaying, or 100,000,000 average taxpayers underpaying 50-100 dollars a piece? That latter would be hard to correct even if you doubled the size of the IRS and couldn’t possible pay for itself.

[Zsofia]

Maybe it’s cynical of me to say so, but if the problem is a few hundred corporations grossly underpaying, it dosen’t behoove certain people to try and put a stop to that. It’s not even a slam on Bush; the rich have always had a great deal of power over the government.

[Frankenstein_Monster]

@Debaser

I’m also slightly horrified by the story of Eric Delore at the end of the other article. As long as outragous abuses of law abiding taxpayers like that can happen I won’t have much sympathy for the IRS. The guy didn’t do anything wrong and now owes $400,000 for money he never made. The government is forcibly taking his income, bank accounts and his house. This is outragious.

(Bolding mine)

Not strictly true. The guy cashed in $1.1 million worth of options, which immediately caused him a $400,000 tax liability, and then took a huge risk by continuing to speculate with the entire $1.1 million unrealized gain.

And it was a high-risk, high-volatility tech stock. The $1.1 million evaporated down to $5000.

So a large amount of greed and stupidity.

I agree with your sentiment that either the tax law, or the unwillingness of the IRS to reach a deal / settlement in the case, are often unreasonable. But the guy is not innocent.

(This happens to be a hot button issue for me. I was offered stock options once and I was scared to death of this effect - I was scared that I couldn’t even sell the stocks on the same day for a good enough price to cover my instant tax liability. Luckily, I didn’t get the options.)

[rjung]

@CalMeacham

I’s long been charged that the current administration has been underfunding the IRS

I suspect the current administration would gladly pump more funds into the IRS if it can be assured those resources will only be spent pursuing tax revenue from specific portions of the populace – such as folks who didn’t vote Republican in 2004.

[drachillix]

@rjung

I suspect the current administration would gladly pump more funds into the IRS if it can be assured those resources will only be spent pursuing tax revenue from specific portions of the populace – such as folks who didn’t vote Republican in 2004.

FYI joe lunchbucket IRS employee has no agenda beyond balancing the accounts placed in front of them, thats enough of a challenge.

originally poster by danblather
If I remember right, Reagan cut IRS workers to “save money”. I think paying workers some percentage of what un-paid taxes they uncover would allow us to hire qualified people.

Make that “percentage of unpaid money recovered” and you might be on to something. Its easy to point out that there is a problem. Harder still to pin down the exact problem, damn near impossible sometimes to extract payment once you have finally identified the problem. I would also be very curious what percentage of this huge tax gap is turned over every year. Is 100 Billion collected but 101 billion in new debt incurred?

One of these days I need to convince my mom to join this board. She is a long term IRS employee who has worked in several departments relevant to this thread (business adjustments, criminal investigations, management).

[DrDeth]

Well- the IRS is badly underfunded. It brings back $10 for every $1 spent on enforcement. However- the big bux are in the higher income returns- and EITC. The GOP doesn’t want the higher income dudes audited- the Dem’s don’t like the IRS auditing EITC, since those are typically Dem voters.

However, right now, the Administration is Republican, and yes, they don’t want the dudes that contributed to their campaign fund audited. Not to mention- no one really like the IRS, and you can’t lose any votes by bashing them and cutting their budget.

IRS pay is mostly based upon how much accounting you have, how long you have been in, and to some lesser extent- the usual favoritism, office politics, and buttkissing. For a Revenue Agent, they require a full accounting degree of units- they usually start at GS-7, and get to GS11 automatically (it takes one year to get to GS9, and another to get to GS11, after that there is a small yearly raise for a while). Getting to GS12 or 13 is when “the usual favoritism, office politics, and buttkissing” come in. For a Tax Auditor, only a basic accounting class is required, but they go only to a GS9.

Rigth now, under the current Commisioner, and under the new Section 1203 laws (a section of laws designed to fire ONLY IRS employees for doing some stuff which other Gov’t employees are usually only warned for on a first offense)- the climate and morale is very low. CalMeacham’s quote is spot on.

My brother is a tax accoutant, BTW.

Finally- do note- a great amount of the 300 Billion is Uncollectable. Dudes that are bankrupt, dead, etc. Even increasing the IRS 10X wouldn’t get it all. However, they could double the IRS’s enforcement staff, and bring in a good portion of it. How many dudes here want to write Congress and ask that the IRS gets a huge increase in their budget so they can do more audits? :dubious: I thought so…

[Evil_Captor]

I have read that the IRS is also reluctant to pursue cases against the wealthy and corporations because they have enough money tgo hire those bright tax accountants that aren’t attracted to IRS wages and working conditions, and so it’s very difficult to collect from them unless someone has been Very Stupid Indeed. Or even if they have.

That’s why the IRS in past years has gone after things like tips earned by waiters and waitresses, becuase poor and middle class people don’t have the power to fight the IRS effectively.

[bare]

Have you ever had an issue with the IRS?

I’m sitting here looking at a stack of paper six inches deep. The problem it seems is that after 14 years, they questioned the existence of one of my children. Resolution should be simple you’d think. Their first inquiry requested copies of his Social Security Card, birth certificate, statements from both his mother and I, photos, school records and medical records or even criminal records.

The first few items were easy to produce but the school records were impossible since all of our children have always been homeschooled and having been remarkably healthy, have few if any medical records.

All this because they think I somehow invented a child 14 years ago, for the what, 1200 standard deduction?

It’s been a year of paperwork flurries through the mail, fax machine and phone, resulting in my having to pay to file for a hearing in Tax court a hundred and fifty miles distant.

Now, a month before my court date, they have decided that I was right all along and have decided to drop the case.

I know how many hours and the expense I’ve undertaken regarding this issue and when I multiply that by the three or four agents that I’ve dealt with in the last year, can only imagine what it’s cost the government to harass me.

This is one taxpayer that doesn’t feel too warm and fuzzy about the IRS adding personnel at the moment.