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Yearly Tax Gap of $1 Trillion Drives Calls for Increased IRS Budget and Enforcement

This week IRS Commissioner Chuck Rettig testified before the Senate Finance Committee that the projected tax gap or the difference of what is actually paid versus what is owed may exceed $1 trillion annually. This revelation follows reports that the top one percent of earners fail to report about 20 percent of their income. 

Not surprisingly, this news has added momentum to the recent Biden administration proposal to increase the IRS budget by over 10 percent, increase hiring and invest in technologies. These moves are designed to reverse a decade-long trend in IRS budget cuts and staffing decreases. With the increased funding, the IRS will target privately held businesses and high-wealth individuals, many of whom have substantial amounts of unreported income per research estimates. 

Among the areas cited as drivers of the tax gap are the rise of cryptocurrency, the use of abusive tax shelters and strategies, unreported foreign accounts, and the cash or underground economy. 

The IRS has already announced several initiatives targeting offshore holdings and cryptocurrency. Every IRS examination now explores these areas with direct and pointed questions to the taxpayer.

Taxpayers with questions or concerns about their tax and financial filings are well-advised to seek competent tax counsel before they are contacted by the IRS. Several programs and strategies can provide closure and peace of mind.

© 2022 Varnum LLPNational Law Review, Volume XI, Number 104
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About this Author

Eric M. Nemeth, Tax Planning Attorney, Varnum, Financial Controversy Lawyer
Partner

Eric is a partner and leads the tax team. He concentrates on tax and financial controversy (IRS and various States) from examinations appellate conferences, criminal investigations, witness representation and civil and criminal tax litigation. He works with government regulatory and general tax matters. He has served as Senior Trial Attorney for the District Counsel of the Internal Revenue Service and as Special Assistant U.S. Attorney for the Department of Justice. He is a frequent speaker on tax enforcement and has served as an expert witness and binding arbitrator....

248-567-7402
Steven G. Cappellino Tax & Corporate Attorney Varnum Detroit, MI
Counsel

Steve is a member of Varnum's Tax Practice Team. He has substantial experience in federal, state and local taxation, in both planning and controversy. Steve previously held positions at both a large international accounting firm and the IRS Office of Chief Counsel. During his 12-year career with the IRS, Steve served as a Special Trial Attorney, handling large business tax cases of national significance. Prior to that, he was a Senior Attorney, advising IRS auditors, managers and executives on domestic and international issues, as well as tax procedure.  As a CPA in the accounting firm,...

313-481-7334
Angelique Neal Tax Attorney
Counsel

Angelique is a member of Varnum’s Tax Team. Her practice includes all aspects of federal and state tax controversy and tax planning, including: tax audits, appeals, and litigation; tax collections – liens, levies, offers in compromise, and other collection alternatives; employment tax issues; and civil and criminal tax litigation. In addition, she handles tax and reporting compliance issues with offshore financial accounts and other assets. She represents individuals and business clients from small businesses to multimillion dollar corporations, including clients with overseas interests....

248-567-7831
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