IRS Tries Tact to Rustle Cash
Either we’re about to get a whole new IRS, or it’s Dr. Jekyll and Mr. Hyde time over there.
In the very season that our view of the agency is most jaundiced, its new commissioner, Shirley Peterson, is out to change the IRS’ traditional bogeyman image--scaring taxes out of everyone, pursuing the last penny.
She’s talking up a “new philosophy,” a “new approach to the way we administer and enforce the tax law.” No more bogeyman but a helpful friend: “I hope,” she said, “that within a short time, it will not be considered a joke when someone knocks at your door and says, ‘Hi, I am from the Internal Revenue Service, and I am here to help you.’ ”
It’s called Compliance 2000 because it will take the IRS into the 21st Century. It will also take until then to get going. And it redefines “Compliance,” which in IRS parlance (always capitalized) meant the strong-arm measures--examination, collection, investigation, prosecution--that give taxpayers no quarter.
But the IRS, under budgetary constraints that limit these activities, has a new insight: Noncompliance isn’t always caused by criminal tendencies but by the taxpayer’s not understanding tax requirements. So the agency has to take a new approach, figuring out what people don’t understand and how it can help them comply.
In fact, Compliance 2000 is not really what they say. It’s not so much a new philosophy as a calculated reallocation of those dwindling resources. “New philosophy” is just a more attractive, stronger-sounding label--not that it matters if it makes it easier to deal with them, which it might.
The goal, of course, is more tax money with less enforcement effort--a valid goal. Unfortunately, the chosen public relations pitch won’t be so straightforward: The official emphasis is on the IRS as “the taxpayer’s advocate,” trying “to make tax compliance work for you, rather than against you,” on “customer satisfaction.”
One already senses some Hyde behind all the Jekyll. Peterson herself is quick to say that this is no promise of “a ‘kinder, gentler’ IRS.” Tax experts may be cynical: “The only way you can get people to comply,” snorted one, “is to scare the hell out of them.”
Taxpayers, for that matter, know perfectly well that they aren’t the “customers” the IRS must satisfy. A money-hungry Congress is its customer; taxpayers are just the mark.
Actually, the problem isn’t the taxpayer’s poor understanding of tax laws. It’s the IRS’ declining ability to enforce them. Every year, a decreasing percentage of taxpayers is audited, and fewer are prosecuted, while the agency’s “accounts receivable have gone up,” said IRS Chief Operations Officer Dave Blattner in Washington.
Furthermore, that someone knocking at the door, eager to help, will stay a joke. IRS “help” will probably be the same old iron hand, relabeled Velvet Glove.
Look at the IRS examples of situations where noncompliance was due to misunderstanding. Blattner noted that taxpayer reporting of interest and dividend income went up markedly since the IRS required that taxpayers get 1099s on all such income. And when children had to have Social Security numbers, reporting of false dependents went down.
But in both cases, the taxpayer’s new understanding was that the IRS had him, foursquare. He learned that the IRS received the same 1099 report; he learned that he could no longer list dogs and elves as dependents.
Similarly, Peterson tells of the IRS discovery that many self-employed taxpayers in Puerto Rico weren’t paying self-employment tax. So it sent notices to 6,000 with self-employment income over $10,000. The result: 40% responded and $2 million was collected. But whatever these people did or didn’t know about tax requirements, they sure learned that the IRS had them on file.
Actually, it may be the IRS that gets all the new understanding. Taking “a Compliance 2000 approach” to compliance problems in one segment of the construction industry, for example, the agency found some significant “barriers” to compliance. Many workers didn’t speak English, and many contractors didn’t bother reporting their wages. Having defined the general problem, the IRS could fashion some solutions.
This is all to the good, examples of an IRS that “works smarter,” in Peterson’s words. Avoiding the old piecemeal approach--pursuit by individual audit--is also cost-efficient, “enabling us,” Blattner said, “to use our enforcement efforts on the hard-core.”
What the new approach is not is something in response to the taxpayer’s lack of understanding. Nor can it be billed as taxpayer help, taxpayer advocacy, a friendly knock at the door. It’s really just better enforcement, based on better IRS understanding. And it’s about time.
