This week, the Obama administration announced it will form a task force to propose changes to the tax code for with the goals of "tax simplification", closing "tax loopholes" and reducing tax evasion, and "reducing corporate welfare".  In the wake of President Obama unveiling his $3.6 trillion budget proposal it is clear that the primary objective of the task force will be to bring more revenue to the federal coffers.

The "Tax Gap"

We have predicted that the new administration would take a more aggressive approach to IRS audits, enforcement and collections. The announcement of the task force seems to be confirming this idea. The stated focus for the task force will be to reduce the so-called "tax gap", the difference between what the IRS believes individual and corporate taxpayers owe and what the taxpayers actually pay.  The tax gap has been estimated to be approximately $300 billion-a-year. However, Congressional Budget Officer Director Orszag indicated that he believes the tax gap may be more than $300 billion and that "we are interested in being as aggressive as possible in trying to reduce that number."

IRS ENFORCEMENT & COLLECTIONS FOCUS

According to the administration, the biggest reason for the gap is underreporting of income. The IRS had previously announced plans to focus its 2009 audit and enforcement actions on withholding taxes, such as income and payroll tax withholding by employers on their employees' income. Disclosing foreign bank accounts and reporting of international transactions is also on the IRS's radar.

RAISING REVENUE

President Obama has not announced a target for the task force to increase revenue. Rather, President Obama has laid down the guidelines that members of the task force may not propose tax increases for 2009 and 2010, and may not propose tax increases on families making less than $250,000. Of course, the task force does not write the federal budget, so it is still possible for the House of Representatives to propose legislation that would increase taxes in 2009 and 2010.

The task force will report to the President on December 4, 2009. We do not expect there to be any good news for taxpayers in the task force's report.

CONTACT US

To speak to a tax attorney about corporate tax planning or how to respond to IRS inquiries, please contact us here or call 713.650.9700.

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