By George L. Yaksick, Jr., Staff Writer
Democrats and Republicans on the House Small Business Committee told IRS Commissioner Mark W. Everson on April 26, 2007, not to overburden small businesses to try to close the $300 billion tax gap--the difference between what taxpayers owe and what they pay.
Rep. Nydia M. Velazquez (D-N.Y.) urged Everson to close tax shelters and offshore tax havens instead of asking small businesses to shoulder a disproportionate share of the IRS's tax gap enforcement strategy.
Velazquez and others on the committee expressed concern that the IRS's FY 2008 budget request for enforcement is unfairly slanted to small businesses. "Instead of skewing resources to small business," Velazquez said, the IRS should do more to close tax shelters and go after offshore tax havens.
"We started with high income individuals and corporations," responded Everson, who is leaving the IRS to become president and CEO of the American Red Cross in May. Audit rates for both groups are up and revenue is flowing in, he said.
Tax Gap Likely Higher
The $300 billion tax gap figure is an estimate. Some of the data, for example information about C corporations, is more than 10 years old, Velazquez noted.
Everson predicted that the IRS will have a better picture of the tax gap in four or five years. "I suggest that if the tax gap data is updated, the proportion attributable to small businesses will be lower," Velazquez observed.
Donald Alexander, who served as IRS commissioner in the 1970s, told
the committee that the tax gap is probably much higher. "It could be $500 billion," he said. The IRS's $300 million tax gap estimate assumes "100 percent compliance of all federal excise taxes," Alexander said. It also ignores the illegal sector, he noted.
Controversial Proposal
Everson told the committee that the White House has made 16 proposals to help close the tax gap. One of them would require increased information reporting on payment card transactions. Issuers of debit and credit cards would report reimbursements made to merchants annually to the IRS.
"We believe this requirement would encourage reporting and compliance," Everson said. However, he acknowledged that the proposal has generated a lot of controversy.
I'm not sure the small business community can handle increased information reporting," Paul Hense, immediate past chair of the National Small Business Association (NSBA) said. Hense, who owns a CPA firm, predicted that card issuers would pass higher fees on to businesses. Some small business might stop accepting credit and debit transactions because of higher costs.
According to Bush administration, the 16 proposals will recover $29 billion over 10 years. "The proposals add up to a very little bite but they beat doing nothing," Alexander said.
Simplification Would Help
"The first and best thing we can do is simplify the Tax Code," said Rep. Steve Chabot (R-Ohio), ranking member of the committee. "Our small businesses are enormously burdened by a cumbersome Tax Code," added Rep. Roscoe Bartlett (R-Md.). Everson reminded the committee that tax reform is the work of Congress and not the IRS, although the Service is doing what it can to reduce taxpayer burden.
Rep. William J. Jefferson (D-La.) predicted that tax simplification will not happen any time soon. "The world we live in is one of a complex Tax Code." Very small businesses have the greatest burden, Jefferson said, as they don't have the same access to accountants and attorneys that large firms do.
James Brennan, chair of the AICPA IRS Practice and Procedures Committee, echoed lawmakers' concerns that complexity is increasingly burdensome to small businesses. "We believe that tax simplification should be a major focus for reducing the tax gap."
Private Collection Agencies
In other news, Everson reported that the Service's private tax collection initiative recovered almost $20 million as of mid-April. The private collection agencies will receive $3 to $3.5 million in commissions.
The IRS expects to recover its investment in the private tax collection initiative "about one year from now," Everson said. Private collection agencies started contacting taxpayers in September 2006.
- Related items:
- IRS Continues Work on Reducing Tax Gap
- IRS Begins Tax Season With Important Issues Unresolved
- Gov't Can't Audit Its Way Out of Tax Gap: IRS Official
- IRS Outlines Taxpayer Protections in Private Debt Collection Program
- IRS Outsources Some Debt Collection Activity
- IRS Releases First Fact Sheet To Address Business Income Tax Gap; More To Come
- IRS Reports $345 Billion in Taxes Went Unpaid for 2001 Tax Year
Added to the news on May 9, 2007.
|
