In the news from time to time are mention of going over the Fiscal Cliff and the ever expanding Tax Gap.
The Fiscal Cliff is political posturing with regards to the national financial debt. The government spends more money that it collects. This is a major problem and can lead to disaster in personal finance, but the national government is different.
The national government prints money and issues debt bonds. The formation of the United States began with enormous war debts to France and tremendous trade imbalances with England. Over 200 years later, China and Japan hold most of the US foreign debt and the largest trade imbalances are with China, Mexico and Germany. The Fiscal Cliff has always been with us.
The Tax Gap is the difference between what taxes are collectively paid and what taxes could potentially be paid. Compliant taxpayers report all wages, lottery winnings, investment, pensions, self-employment and all other income. The IRS and other study groups agree that 85% of the potential tax owed the US government is collected. The other 15% is the tax gap that is comprised of tax evasion, fraud and uncollectible tax.
The IRS is continually on a mission to close the tax gap between income Americans earn and income Americans report on their tax returns. As part of this mission is IRS enforcement.
If you receive an IRS notice, contact the Medford Tax Experts immediately. We can research the cause and maintain your good standing with the IRS.
Divulging poor record keeping habits to the IRS creates massive headaches for you. The penalties for willful neglect are significant. Resolution will consume a tremendous amount of your time. Contact the Medford Tax Experts for assistance with your record retention responsibilities.
The US Government Accounting Office, (GAO), strategizes to close the Tax Gap utilizing these punch points
- execute compliance checks before issues refunds
- develop sophisticated compliance strategies
- require more third party information
- increase IRS enforcement efforts
- leverage whistleblowers
- optimize professional preparer services
- modernize computer operations
- simplify the tax code