A recent report from Government Accountability Office says that the Internal Revenue Service needs to establish a more “results-oriented approach” to reducing the tax gap — the difference between taxes owed and taxes paid in the country.

The report advises the IRS to start by establishing long-term compliance goals, as well as periodically measuring compliance and developing better compliance data.

“IRS approaches tax gap reduction through improving taxpayer service and enforcing tax laws, and has two broad strategic goals and related key efforts that are intended to support this approach,” the report said. “However, IRS has not established long-term, quantitative compliance goals and regularly collected data to track its progress, which would complement its current, important compliance efforts.”

The Senate’s head tax writers had requested the study.

The IRS estimates that underreporting of taxes accounted for between $250 billion and $292 billion of the $312 billion to $353 billion tax gap in 2001, with underpayment and nonfiling accounting for another $62 billion. The IRS plans to improve those estimates by the end of this year, though the report said that the IRS has concerns about the data it is beginning to record on why taxpayers are noncompliant.

The IRS is under pressure to increase taxes collected and stop taxpayers from underreporting income.

Article from GAO

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