Tax laws

What Can the IRS Do to Enforce Tax Laws? : NPR

Scott Simon of NPR discusses the IRS’s ability to enforce tax laws with Chye-Ching Huang of the Tax Law Center at the NYU School of Law.


* If there is indeed a bipartisan deal on new infrastructure spending, one thing that won’t help pay for all of this is collecting the money taxpayers already owe. Negotiators agreed not to include any provision that would have strengthened the IRS’s ability to enforce tax laws. Chye-Ching Huang is the Executive Director of the Tax Law Center at the NYU School of Law and is joining us now. Thank you very much for being with us.

CHIE-CHING HUANG: It’s great to be here.

SIMON: Why was a provision that would have meant more money that is owed to the federal government in the federal budget removed?

HUANG: Well, that’s a great question because it really would have been, on a political basis, a win-win. It would have been – the federal government, as you say, would have been good for honest taxpayers as well, because it would have made them less likely to be audited. And that would have been good for the idea that the laws should be followed.

So my understanding is that he dropped out due to concerns about the impact on business and also the privacy issues that were raised. But in my opinion, these two concerns are really misleading in that they would not have resulted in more compliance costs for small businesses. And the privacy issues that have been raised have really nothing to do with the proposals that are on the table.

SIMON: Do we have any idea how much money we’re talking about?

HUANG: The idea would have been that the proposed $ 40 billion that would have been added to the IRS budget would have raised about six times the amount of increased compliance, especially from high-income filers and large companies. So we’re talking about large sums of money that are currently owed by people on the books, but are just not being collected. And these would have been collected.

Even though this is a large sum of money, it is somewhat conservative in the sense that it is less than a tenth of the amount of taxes that are owed each year but are not collected.

SIMON: And why aren’t they collected? I know there is no one answer to this.

HUANG: Well, I mean, a big reason is that the IRS since 2010, due to budget cuts, has lost over a third of its staff expert enough to audit the complex returns of high income filers and taxpayers. large companies. . And audit rates among these two groups have fallen by more than half. So this creates a real problem and a real deterrent to compliance for people who may want to push the boundaries or even exceed the limits, as there is much less eye on the people most likely to be noncompliant.

SIMON: Your inference is that these are people who know the tax laws or employ professionals who know the tax laws for them and rely on the reduced number of auditors to be able – I don’t know how to put it nicely – to get away. with something.

HUANG: Yes. I mean, most of the dollars we’re talking about here that go unpaid come from the highest income tax filers who are overwhelmingly represented by tax professionals. And to the extent that they have statements that are verified, they tend to be some of the more complex statements, and they can afford representation in this verification process and even sort of fight in court by paying that. that they are asked to pay in this way. to treat.

These aren’t – we’re not talking the kind of – the people who call the IRS directly because they want to pay what they owe and they need help figuring out what the forms are. This is another big issue that the restored funding would help, as the IRS currently cannot answer more than one-fifth of the calls it receives simply because it does not have enough staff.

SIMON: Madame Huang, is this an argument for simpler and less complicated tax laws? People have argued for years that there are so many loopholes, so many different and complicated levels of tax information that need to be filled out that it invites people to be too creative, and the government suffers.

HUANG: Absolutely. And I think some of the complexity is there because some of these private interests actually asked for that complexity. They asked Congress to include provisions that are really difficult for the normal declarer to understand. But for the people who can’t afford to represent themselves as to how to get – you know, making every dollar out of the different tax code provisions can be very lucrative. They are also able to weigh heavily on tax regulations and tax affairs, even more complicated forms of ruling over how federal tax law is applied in practice, and able to try to shape them to their advantage. Some of this complexity really exists for no other reason than for the benefit of the people who have requested this complexity.

SIMON: Chye-Ching Huang, who is the head of the NYU Tax Law Center, thank you very much for being with us.

HUANG: Thank you.


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