As part of Congress’s additional $80 billion in funding over 10 years (which was included in the Inflation Reduction Act), the Government Accountability Office is pushing the Internal Revenue Service to do more to close the $428 billion annual tax gap. This would include stricter enforcement of tax laws to collect unpaid taxes.
The Government Accountability Office Report
In a report released Monday, the GAO said the IRS could reduce the tax gap in part by enforcing tax laws. The Biden Administration passed the Inflation Reduction Act along party lines over the summer, providing the IRS with $79.4 billion in funding over the next decade, some of which will go toward enforcement, but other funds will be used to improve taxpayer service and IRS technology as well as hire more IRS employees to replace retiring employees.
“Limitations in the systems IRS uses to account for federal taxes receivable and other unpaid assessment balances continued to exist during fiscal year 2022,” said the report. “In addition, continuing information system control deficiencies in areas such as encryption and configuration of security settings increase the risk of unauthorized access to, modification of, or disclosure of sensitive financial and taxpayer data and disruption of critical operations.”
IRS Not Listening
According to the GAO, it has made numerous recommendations to the IRS in previous reports, and if they had been implemented fully, they could have significantly improved the IRS’s ability to enforce tax laws in high-risk areas. There are still 176 recommendations unimplemented by the IRS as of this month, including 25 that the GAO considers a high priority.
“While IRS made progress in addressing the lack of a subsidiary ledger for unpaid assessments, certain system limitations and errors in taxpayer accounts nevertheless continue to hinder IRS’s ability to effectively manage its unpaid tax assessments on a timely basis,” said the report. “Specifically, IRS’s financial systems currently cannot report the balances of the various categories of unpaid assessments, including gross taxes receivables, without significant inaccuracies. Instead, IRS uses a complex and labor-intensive statistical estimation process to compensate for system limitations and errors in taxpayer accounts to annually derive these figures.”
Wrap Up
It seems as though the GAO has outlined multiple helpful suggestions to the IRS in hopes that they will use this huge increase in funding to fix a lot of the problems that they have within the agency. The GAO is not the only group to outline suggestions for the IRS, as Janet Yellen, the United States Treasury Secretary also laid out a 6-month plan to help the IRS.