Prometheus 6

The issue of the tax gap has taken on new urgency with the Democrats now in control of Congress and hoping to finance an ambitious agenda without raising taxes. House and Senate Democrats say the government could collect as much as $100 billion more a year. But the Treasury Department, which oversees the I.R.S., says it cannot realistically recover a tenth as much as Democrats suggest.

Hey, we'll take $10 billion. No problem.

Asked about data showing that additional taxes recommended for each audit are up, the agents who were interviewed all said that this showed only how pervasive tax cheating had become.

I.R.S. Agents Feel Pressed to End Cases
By DAVID CAY JOHNSTON

The head of the Internal Revenue Service faces questions in Congress today about auditors’ complaints that they are being forced to close corporate cases prematurely, allowing billions in tax dollars to go unpaid.

In interviews, these revenue agents warned that unless they were free to pursue what their instincts tell them, their focus would end up being only on known abuses, and new ones created by the tax advice industry would go undetected.

The agency countered that it had increased the number of companies whose tax returns it examined by a fourth since 2001, even though the number of auditors was virtually the same.

Agency officials said this was accomplished by cutting back slightly on audits of the very largest companies, which produce more than 80 percent of all corporate profits, while increasing audits of those with assets of $10 million to $250 million. At the same time, the officials say, they have shortened the average time to complete an audit from almost two years in 2001 to less than 18 months last year.

I.R.S. officials say the auditors who are complaining are mostly older agents unwilling to adopt new approaches.

Mark W. Everson, the I.R.S. commissioner, is scheduled to testify this morning before the oversight subcommittee of the House Ways and Means Committee. The hearing, the subcommittee’s annual examination of I.R.S. operations, will also look at the gap between the amount of taxes paid and the amount owed.

The issue of the tax gap has taken on new urgency with the Democrats now in control of Congress and hoping to finance an ambitious agenda without raising taxes. House and Senate Democrats say the government could collect as much as $100 billion more a year. But the Treasury Department, which oversees the I.R.S., says it cannot realistically recover a tenth as much as Democrats suggest.

Mr. Everson was gently questioned in the past. At this year’s hearing, the new Democratic majority has asked Representative Lloyd Doggett of Texas, a Democrat who is not a member of the subcommittee, to join in questioning the commissioner. Mr. Doggett, a former justice of the Texas Supreme Court, is a longtime critic of what he sees as tax favors for the rich and corporate tax dodges.

Deborah M. Nolan, the I.R.S. official in charge of auditing businesses with more than $10 million of assets, said that her auditors recommended payment of almost $27 billion in additional taxes last year, more than double the amount in 2001, but down 15 percent from 2005 when added taxes totaled almost $32 billion.

She said these numbers vindicated the strategy of focusing on auditing more companies and focusing on large-dollar tax issues, not lesser ones.