IRS Head Links Staff Shortage to Tax Gap : Egger Says More Auditors Would Yield $10 Billion in Five Years
The Internal Revenue Service could bring in an additional $10 billion in revenue by doubling the number of new auditors it plans to hire to examine tax records, IRS Commissioner Roscoe L. Egger Jr. said Friday.
IRS studies show that the agency’s plans to hire 7,500 auditors during the next three years will bring in about $10 billion over four or five years and that the subsequent hiring of another 7,500 would bring in an additional $10 billion, he said.
The gap between the agency’s estimate of taxes due and taxes actually collected has widened from about $29 billion in 1973 to $100 billion this year, the IRS estimates. As recently as the mid-1970s, Egger said, the IRS collected about 90% of taxes due from individuals and corporations but this year will collect only about 81%.
Wants Optimum Effort
Egger, who is retiring at the end of April after five years as commissioner, attributes much of the gap to a personnel shortage and says that at least 15,000 new auditors will be required over the next several years to provide optimum collection efforts by the IRS.
“For each percentage point that the overall compliance level drops today, it costs about $6 billion in revenues for that year,” said Egger, who was interviewed at a breakfast with The Times’ Washington Bureau. " . . . If we dropped down two percentage points over a five-year period, that translates into a $12 billion-a-year revenue loss.”
Egger expressed concern about increasing attempts by other government agencies to use IRS data. He said he has resisted pressure from the Office of Management and Budget to expand a pilot program of allowing several agencies to use IRS information to check whether applicants are eligible for benefit programs.
More Data Shared
The IRS now makes data available to the Social Security Administration to help it verify whether applicants for benefits have income or asset sources that have not been reported. And, under a 1984 law that provides for the pilot program, the IRS is making data available to the Small Business Administration, the Veterans Administration and the Education and Agriculture departments. The information is provided to the Agriculture Department only for checking for eligibility of food stamp recipients.
“OMB is very anxious to spread that to all of government,” Egger said. “I’m more anxious to find out more about impact on the system before we spread it.”
So far, he said, there have been “pluses and minuses” to the pilot program, but it has not been in effect long enough to know whether the overall impact is positive or negative. Making tax information more widely available, he suggested, could undermine taxpayer confidence in the income tax system.
Egger said he was “very concerned that the more we encroach on the confidentiality of tax return information, the more wary people will be telling it like it is. At this point, I think the taxpayers in general tend to believe that when they send that information in on the tax return that nobody is going to get it that isn’t authorized to have it.”
‘Happy to See Me Go’
The commissioner, who has stressed his views to the OMB and Congress, said: “I think everybody’s rather painfully aware of my position and would be happy to see me go.”
The IRS, which last year experienced inordinate delays in processing taxpayers’ refunds because of computer foul-ups and other problems, this year has been processing refunds within five weeks, Egger said.
But taxpayers who file their returns in the final two weeks before the April 15 deadline will face a much longer waiting period. “My hope is it won’t go over eight weeks,” said Egger, who added that the IRS had received about 53 million returns by the end of March and expects to have received another 45 million by the deadline.
Egger stressed that, despite IRS regulations this year that taxpayers need written records to substantiate the use of an automobile and other expenses in connection with business operations, the IRS will accept other evidence of such expenses.
Last year, there was such a public outcry about an IRS regulation that required taxpayers to keep an auto log of expenses incurred in business operations that Congress repealed the law on which the regulation was based.
Took Blame From Congress
“The auto log thing was a comedy of errors, I guess,” Egger said. “Congress forced us to do it and then blamed us for doing it, and they’re about to do that again in some quarters.”
He explained that this year, at Congress’ direction, the IRS put a series of several questions on the tax form for business expenses, “the inference of which is that if you don’t keep written records, you’re not going to have a deduction.” And now, he said, some members of Congress who supported the legislation are saying that “ ‘they can’t do this to us; we repealed all that, and now they’re back at it.’ ”