IRS chief says unpaid taxes can be cut by billions

Ryan J. Donmoyer, Bloomberg News

Published February 16, 2006 at midnight

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The U.S. can collect $50 billion to $100 billion of the $345 billion in unpaid taxes each year without inconveniencing taxpayers, Internal Revenue Service Commissioner Mark Everson said.

Everson told the Senate Budget Committee on Wednesday that the agency could take steps to reduce the so-called tax gap, which is the amount of money known to be owed that isn't paid because of cheating and taxpayer mistakes.

"While no tax systems can ever achieve 100 percent compliance, the IRS is committed to finding ways to increase compliance and reduce the tax gap, while minimizing the burden on the vast majority of taxpayers who pay their taxes accurately and on time," Everson said.

The size of the tax gap is gaining attention on Capitol Hill because it is almost the same amount as projections for next year's budget deficit.

The White House's Office of Management and Budget estimated the deficit would reach $354 billion in the fiscal year beginning Oct. 1.

"Reducing the tax gap would help improve fiscal sustainability," Comptroller General David Walker testified at the hearing. He called for enhanced IRS strategies, legislative changes to simplify the tax laws and new enforcement tools such as better information reporting.

Everson said that gap could be reduced to as little as $190 billion by taking steps to encourage voluntary compliance with the law and focusing enforcement efforts on willful tax cheats.

The IRS will use the findings of random audits of 46,000 tax returns to produce better results, he said.

Just boosting the compliance rate to 85 percent from the current 83.5 percent would generate an extra $30 billion in revenue annually, he said.

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