The US Treasury just released a Report authored by Natasha Sarin, Deputy Assistant Secretary for Economic Policy, titled “The Case for a Robust Attack on the Tax Gap” , and it provides new information on what the Government views as to what constitutes the “Tax Gap” and what needs to be done about it. The “Tax Gap” is the difference between taxes paid and taxes owed by law, so it basically shows the annual difference between what the IRS fails to collect that it should have collected. During April 2021 testimony before the Senate Finance committee, Chuck Rettig, Commissioner of the IRS, put the Tax Gap at as much as $1 trillion per year. Now this report claims that as much as 28% of the total Tax Gap is attributable to the top 1% of taxpayers.
“Currently, an under-staffed IRS, with outdated technology, is unable to collect 15 percent of taxes that are owed, and a lack of resources means that audit rates have fallen across the board, but they’ve decreased more in the last decade for high earners than for Earned Income Tax Credit (EITC) recipients. For the IRS to appropriately enforce the tax laws against high earners and large corporations, it needs funding to hire and train revenue agents who can decipher their thousands of pages of sophisticated tax filings. It also needs access to information about opaque income streams—like proprietorship and partnership income—that accrue disproportionately to high-earners.” See “The Case for a Robust Attack on the Tax Gap” Report at pg. 1.
Whistleblowers are ideally situated to uncover exactly this kind of information about high income earners and large corporations that the IRS is hoping to crack down on in their attempt to close the Tax Gap. The Report further adds: “tax evasion is concentrated toward the top of the income distribution because higher-income taxpayers have the ability to tap into the services of accountants and tax preparers who help shield them from bearing their true income tax liability.” It is this kind of sophisticated tax schemes and avoidance or evasion techniques that the tax whistleblower lawyers at Lynam Knott can help the IRS unravel. With the information of a well prepared and well advised whistleblower, the IRS can be better equipped to succeed in their desired “robust attack” on the large portion of the Tax Gap attributable to the top 1% of taxpayers.
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