The annual report just issued by the IRS Oversight Board says that two serious systemic weaknesses "will cause long-term performance issues for the tax administration."
While the report highlights the "tax gap" and the IRS "archaic information technology systems," it actually reveals so much more about both the IRS and the complexity of the tax law. Basically, the problems of tax administration aren’t the fault of the IRS, but of Congress.
As the report observes, the two weaknesses are exacerbated by presumably Congress’ "under-appreciation of the importance of tax administration."
How do they know that? The evidence, the Oversight Board says, is by the willingness to expand the complexity of the tax code with little regard for the impact on the taxpayers or the resources needed by the IRS to administer the tax code.
The way I see it, if the problem isn’t with the IRS, and not the taxpayer, then the Oversight Board must be talking about Congress.
While Congress churns out "a variety of financial benefits to the taxpayer," the result has been "to stretch the IRS" resources. In my view, what we are stuck with is a tax system that the IRS cannot administer and the taxpayer cannot comply with all because of Congress.
The report goes on to talk about something called the "tax gap." What is a "tax gap" you may wonder? This is that mystical amount of billions of dollars of tax that should be collected versus what is actually collected.
But as the Oversight Board admits, neither the board nor the IRS can determine with any degree of certainty whether the IRS is making progress in reducing the "tax gap." Worse yet, the IRS systems are so archaic that they are using "estimates" from data garnered from 2001 tax returns.
So, here we have the reason for the crackdown on taxpayers. Congress had come up with some number which cannot really be determined with any degree of certainty. Based on that hypothetical number, which cannot actually be calculated, Congress is passing more and more tax enforcement laws and penalties to tax the money in the "tax gap" which an underfunded IRS cannot really collect.
Another explanation is possible. That is, there is no such thing as a "tax gap." All this effort imposed on the taxpayer's and the IRS is due to Congresses desire to shift blame from themselves and put it on the boogie-man in the closet.
One point made in the Report which I found particularly interesting was the observations of the new Patient and Affordable Care Act, sometimes referred to as Obamacare.
If you may remember, the implementation of the healthcare law was given to the IRS.
The board states quite clearly that the risks of implementing the healthcare law increase if the IRS doesn't receive the resources it needs. "With IRS resources already stretched thin to administer an increasingly complex tax code," the IRS needs to be properly funded.
What I took away from the annual report of the IRS Oversight Board isn’t just that there are two systemic IRS weaknesses. It's a lot more than that.
Congress is out of control in its abuse of the tax law and the IRS, and the tax system we have is an unredeemable failure. It's time for both the IRS and the taxpayers to have a new tax system altogether.
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