Ohio CPA Dana Stahl has picked up the torch to get to the bottom of the IRS’s “Tax Gap” figures:

Subject: IRS Tax Talk

Mr Guru - I've been participating in an IRS "Tax Talk" today.  One presenter mentioned that "Tax Gap" study from a couple of months ago, where IRS determined there is an over $300 billion tax gap in taxes that should be collected vs taxes actually collected.  The presenter stated IRS examined over 46,000 1040's from 2001 & then came up with their findings.  I asked the presenter if there was someplace that I could look at this study in more detail.  I didn't go into our theory that these type of studies with their conclusions are merely WAGs.  It will be interesting to see if there is actually a way to review these studies & their conclusions.  I'll let you know.

…the presenter asked me to email her my question and then she would "get back to me".  I'll be waiting anxiously!

DS, CPA

I wrote back:

Dana:

I would be very interested in seeing what documentation they provide you.  I doubt that it will be much more reliable than what I found several years ago when I spent a lot of time trying to track down the actual data behind one of those IRS press releases about the tax gap.  I followed the chain of command all the way into IRS headquarters in DC, where they finally admitted that they made the numbers up.

How studying a certain number of tax returns to determine the tax gap makes sense is something I don't understand, since the main component of the mysterious tax gap is supposed to be people who don't even file tax returns. 

They don't even have the decency to admit that they really have no way of knowing the size of the underground economy because such measurements are by definition impossible to make; so they persist with the pretense of knowing exactly how large the tax gap amounts are, with the implication that they could zero out that gap if they were only given enough money and power.

As always, it's nothing more than a propaganda ploy that IRS uses to convince our rulers and the public to give them more money and power.  It's just one more (of many) indications of the lack of true journalistic skills nowadays that the mainstream media just continue to report the IRS's tax gap numbers as gospel without the least bit of investigation into their source, as you and I are doing.

Thanks for keeping me in the loop on this.

Kerry

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 8/08/2005 11:37:00 AM Send this post: