Senate Bill 2198, Taxpayer Compliance Improvement Act of 1982

GAO discussed the problem of the income tax compliance gap and the need for Senate Bill 2198, the Taxpayer Compliance Improvement Act of 1982. This bill seeks to reduce the shortfall in Federal tax revenues by focusing on noncompliance attributable to some types of unreported income, the most serious IRS compliance problem. IRS must strive to achieve the highest possible degree of voluntary compliance with the tax laws. The bill should help IRS reduce the compliance gap by improving information reporting and providing for comprehensive revision of the penalty and interest requirements. The sponsors of the bill also recognize the need to increase the level of IRS resources. The proposed legislation calls for information reporting on: (1) interest payments on Federal debt and bearer obligations; (2) charged tips; (3) transactions involving capital gains on securities and commodities; and (4) State tax refunds. The bill seeks to improve information reporting through specific measures designed to better insure that IRS can use all of the information documents it gets. The penalty provision is important. IRS cannot compare or match information documents to tax returns without the identification number, and it is costly for IRS to research its own records or to contact payers to get missing numbers. Increasing and assessing the penalty for submitting documents without the identification number would help take care of that problem and serve as a greater deterrent. In addition to the need for measures to improve the completeness of information reported, GAO agrees that measures are needed to protect against nonreporters. GAO believes that the bill is a step in the right direction and, together with additional resources, should facilitate IRS enforcement of the tax laws.