Taxpayer Noncompliance]

A speech was given to the Washington Chapter of the National Association of Accountants on the Internal Revenue Service's (IRS) efforts to combat taxpayer noncompliance. The Tax Equity and Fiscal Responsibility Act (TEFRA) has attempted to solve some problems of taxpayer noncompliance by expanding and improving information reporting requirements and granting special enforcement authority to IRS. Presently, IRS has nine major enforcement programs which are directed toward detecting or deterring nonfiling, underreporting of income, overstating of income offsets, and nonpayment of delinquent taxes. An IRS policy to examine all identified tax shelter returns has consumed an ever-increasing percentage of IRS examination resources. The TEFRA has strengthened existing penalties and added others for use against taxpayers who participate in abusive tax shelters and promoters of such schemes. It may also give IRS some relief from the administrative burden which results from tax shelter examination. The biggest noncompliance problem facing IRS, in terms of revenue loss, is the underreporting of income which reached over $52 billion in 1981. Underreporting is difficult to detect through examinations; however, the TEFRA has expanded information reporting, increased information reporting on interest payments, improved documentation requirements, established or increased penalties for noncompliance with information requirements, and given IRS the authority to set standards for computerized filing. GAO has also accomplished much to help improve IRS ability to reduce taxpayer noncompliance and has greatly influenced IRS in developing its current program strategies for addressing the noncompliance problem.