IRS Lacks Funds to Track Tax Evaders

Salary increases and unexpected expenses absorbed money the Internal Revenue Service had planned to use to track tax evaders, government investigators said Tuesday.

The General Accounting Office reported that even with budget increases and internal goals making compliance a top priority, the money devoted to collecting unpaid taxes declined from 2000 through 2002.

The IRS Oversight Board concluded the agency does not have enough money to chase uncollected taxes calculated at $280 billion and growing.

“Particularly vexing to the Oversight Board is the number of potential examination and collection cases the IRS has identified but cannot pursue due to lack of resources,” board member Karen Hastie Williams told a House Ways and Means subcommittee. “For many of these cases, the IRS is only assigning resources to approximately 20% to 30% of the cases it has identified.”

The IRS recently reorganized its enforcement goals to target areas of fraud and abuse such as offshore accounts, low-income tax-credit fraud and corporate tax shelters.

Unexpected costs ate away at budget increases, however, and savings in other areas that were supposed to have been dedicated to enforcing tax compliance never materialized.

Acting IRS Commissioner Bob Wenzel said Congress has not given the agency enough money to pay mandated salary increases. Other expenses also mounted: Unexpected security requirements cost $20 million, and postage went up $22 million.

The Oversight Board recommended adding $287 million to the president’s request to finance the IRS at $10.4 billion next year. Part of the money would pay for the first year of a five-year plan to improve compliance with tax laws.