Platts Holds Hearing on Closing the $385 Billion Tax Gap, Preventing Tax Identity Theft

The Subcommittee on Government Organization Efficiency, and Financial Management (chaired by U.S. Congressman Todd Platts) held a hearing entitled, “Problems at the Internal Revenue Service: Closing the Tax Gap and Preventing Identity Theft.” The hearing focused on the $385 billion gap between what people owe in federal taxes and what IRS ultimately collects, as well as followed up on previous hearings in June and November held by Congressman Platts.

Testimony at the hearing was received by IRS Deputy Commissioner of Enforcement Steven Miller, National Taxpayer Advocate Nina Olson, Treasury Inspector General for Tax Administration J. Russell George, and the Government Accountability Office (GAO) Director of Strategic Service James White.

Federal taxes make up about 96 percent of the government’s total revenue each year. Because of this, it is very important that the IRS is able to effectively collect taxes and enforce federal policy. Earlier this year, the IRS released its most recent analysis on the tax gap, using data from 2006. That data shows a $450 billion gap between taxes owed and taxes voluntarily paid. IRS recovered $65 billion, making the net tax gap $385 billion. According to the National Taxpayer Advocate, the average household must pay almost $3,400 more for the government to raise the same revenue it would have collected if everyone paid their taxes in full.

“There are many causes of the tax gap, including intentional underreporting, failing to file taxes, or math errors. Because of this, we need a multifaceted approach to achieve an effective and appropriate response and close the tax gap,” said Congressman Platts. “The Treasury Department has recommended increasing penalties for people who purposely do not comply with federal tax law. Simplifying the federal tax code could also help by making it easier to file taxes and reducing the opportunity to commit willful tax evasion.”

Identity theft affects thousands of taxpayers each year, and has a significant impact on its victims. Identity thieves often steal personal information from taxpayers including names, social security numbers, and addresses. With this information, the thieves can file fraudulent tax returns with the IRS and receive the refunds that are owed to the legitimate taxpayer. Victims may not even know they have had their identity and tax return stolen until they file their own returns and IRS notifies them.

“Identity theft-related tax fraud is a serious and rapidly growing problem that has been the focus of two of this Subcommittee’s previous hearings,” said Congressman Platts. “While significant work is being done to address this problem, we must do more to protect taxpayers from criminals who steal their identities and their refunds.”