Tax Cheating Down 20%, IRS Chief Says

Cheating on federal income taxes has declined by as much as 20%, mainly because of tax law changes and tougher federal policing, Internal Revenue Service Commissioner Lawrence B. Gibbs said Tuesday.

Gibbs told a House Appropriations subcommittee that an IRS study indicates the much publicized “tax gap”--the difference between taxes owed and taxes paid--has dropped to between $80 billion and $90 billion in 1987. The agency’s last report on the annual gap estimated that it would rise to more than $100 billion in 1987.

Gibbs attributed the decline to campaigns by Congress and the IRS to force stricter compliance, through tougher penalties and the computer-matching of tax returns with income reports, and to the numerous changes brought about by the 1986 tax law revision.

The commissioner also announced that the IRS has temporarily suspended efforts to collect back taxes from students who were paid stipends for teaching or research work at their universities.

“We’ve put the word out (to IRS offices) to hold up on any” of the students’ cases that are pending until the agency adopts a consistent policy on how such income should be treated, Gibbs said.

He said cases affecting students who receive stipends developed from a computer matching of employer reports with students’ tax returns--not from any IRS initiative to “go after the graduate students.”

Inconsistency Cited

In dispute are stipends paid in 1984, 1985 and 1986. The 1986 tax revision declared all such stipends to be taxable income.

“Apparently there are some inconsistencies in the way the examination of students’ returns are being conducted,” IRS spokesman Steve Pyrek said. There is a wide variety of stipends paid by colleges and universities, he noted, and some IRS field offices are following court decisions on the issue while others abide by a 1975 ruling.