IRS Must Work Harder and Smarter Before We Ever Talk About Tax Reform
After 37 years as an IRS employee and now a tax professional (enrolled agent), I am sick of the talk about tax reform, before it has even started. The IRS is so underfunded, understaffed and using antique equipment and it simply cannot respond to the tax administration needs of the United
States of America. This is not by accident, past Houses of Congress, Republicans and Democrats designed the system this way so that they and their friends could get away with not paying trillions of dollars in taxes.
In Inspector General of IRS has reported that every year the IRS pays out at least $50 billion dollars in fraudulent refunds. They have recently reported that employers take withholdings out of employees and then fail to pay it in to the IRS, this costs $45 billion a year. Actually none of these numbers is even high enough, we have a huge underground cash economy ($700 billion) that pays zero taxes year after year. So if you doubled or even triple these numbers you would still not be anywhere near the true amount of money that the IRS does not collect.
If you add in unreported and under-reported income the financial tax loss is incalculable. Of course it is becoming well known that the IRS does not audit hardly anyone anymore.
Today, I want to focus just on employment taxes that are not paid. You might ask how does a business get into that situation. Easy. They start a business and never have adequate capital to run it. A business struggles and cash flow is tight. So they are always borrowing. There is sometimes not enough money to pay the rent, the utilities and the suppliers and the employees, let alone the employment taxes that might be 20-40% of the payroll. So what do they do, they pay everyone else- they make the choice to violate the law and not pay those taxes. There used to be risks associated with this, but now the IRS barely enforces any of the tax laws.
I can go on, but instead, when I retired as s Senior IRS Tax Collector after 33 years, instead I wrote a book called IRS Whistleblower, available on Kindle and Amazon, that outlines all that could be done to enforce the existing tax laws and bring in more money. Let me know what you think that we could dotogether to improve this system.
I’m proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money. Arthur Godfrey