Tax Enforcement Problems

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Tax enforcement represents a significant problem for the IRS because they do not have the resources or the know how to discover dishonesty, tax evasion or complicated tax issues. Discover how important tax law reform has become to government officials, the IRS and the public with information from a certified public accountant and personal financial planner in this free video on taxes.

Part of the Video Series: Tax Law, Real Estate & Credit Tips
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Video Transcript

My name is Miranda Chook and I'm a CPA. The IRS relies mostly on voluntary taxpayer compliance for the bulk of its tax receipts. However there are still significant amounts of taxes that are owed that go unpaid. Mostly due to the quality of information that's available to the IRS as well as to the limited resources available to them to go after under reporting of income or outright tax evasion. For example, in the case of taking too many deductions, it is unclear to the IRS how much is due to dishonesty and what might be due to confusion or complexity in the tax law. And because of this it's difficult for the IRS to verify the accuracy of information on returns and as mentioned earlier the limited resources makes it difficult for them to focus on specific areas of non-compliance. Now tax codes are not only complicated to tax payers but also to the IRS. For example the rules surrounding capital gains taxes and the introduction of relatively new benefits such as education credits also make compliance difficult for the IRS. And on the corporate side, corporate tax laws are also quite complicated in changing from year to year. So the complexity also adds to the IRS's problems in terms of enforcement. Now the new president has indicated that he wants significant changes in the tax code for individuals as well as for corporations. So we'll just have to wait and see if that actually makes it easier on both tax payers and the IRS and perhaps as a benefit to the IRS in terms of perhaps increasing collection efforts.

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