The Internal Revenue Service (IRS) is responsible for enforcing tax laws and collecting taxes in the United States. However, the number of IRS tax evasion cases brought to justice remains surprisingly low, leading many to wonder why so many individuals and businesses are able to dodge their tax obligations. In this in-depth article, we will explore the factors contributing to the low rate of IRS tax evasion cases, the challenges faced by the agency, and the implications for tax professionals and their clients. As a CPA, tax professional, or enrolled agent, understanding the complexities of tax evasion enforcement can help you provide valuable guidance to your clients and keep them compliant with tax laws, thereby reinforcing your position as a trusted expert in the field.
Tax evasion, whether by legal or illegal means continues to threaten an already vulnerable tax system. It keeps getting easier to dodge taxes. The result? Historically low levels of revenue. Put at risk is everything from our military preparedness budget to the already unstable social security.
3 things enable tax dodgers’ ploys in particular.
- New incentives for would-be evaders
- Lessening support for the IRS
- Widening partisan distrust
Who is Cheating?
It’s not as easy for taxpayers in the private sector to cheat. Those who receive paychecks or salaries and file W-2 forms have fewer opportunities to avoid paying taxes. The IRS has too much information from employers and taxpayers via withholding records.
Businesses, on the other hand, can be (and are often) creative. They’re the biggest cheaters.
Tax Evasion, Small Business Style
One of the greatest culprits is a small business. They’re less bureaucratic, often small shops with single owners, freelance consultants, and other independent contractors.
Blatant encouragement to cheat makes fudging easy.
What does party have to do with it? Comparison of different tax systems shows that taxpayers are more likely to pay when they have faith in their government and the fairness of its tax system.
Problem number one: US citizens don’t have much faith in the government.
Problem number two: Rising partisanship is a breeding ground for further mistrust of the leader in office by constituents of the opposite party.
How much are taxpayers currently concealing? Year after year after year, the IRS makes that calculation as part of its “tax gap” reports. That means the most recent data (2008-2010) reflects a time when funding cuts were only beginning. The new Republican tax bill would be years down the road.
Are You A Member of IRS Solutions Software?
With all the tax codes changes and new bills, things can be confusing. IRS Solutions Software membership cuts the learning curve to a fraction, saving time and money.
Note: The IRS will be relying more on computerized notices and automatic penalties than ever before. The result? More work on penalty negotiations. And without human eyes on documents, there will also be more errors on the part of the IRS. As a member, be sure to use the notice response tool to abate penalties.
What? Not yet a member? Why not? IRS Solutions Software gives you the confidence to provide services you may have been uncomfortable with in the past. Another benefit of membership is the training you get on our monthly case study calls.
Don’t Miss Out! Sign up with IRS Solutions Software and Gain Access to These Informative Monthly Case Study Webinars on the 4th Thursday of Every Month at 10am-11am PDT.