It’s late April and time for a column in defense of the depleted forces of the IRS.
It’s our duty to pay for the military, Social Security, Medicare and the other programs appropriated by Congress.
I have observed that most Americans like their government program, but not yours. And few cherish paying taxes.
It falls to the often-maligned IRS to inform, assist and, decreasingly, audit or investigate in pursuit of what is owed.
Most taxpayers, about 70 percent in 2016, receive a refund from the IRS of about $3,000.
The IRS collected roughly $3.4 trillion last year and issued $437 billion in refunds.
The federal budget deficit is heading toward $800 billion this fiscal year, due to more spending and the recent tax cuts.
Then there’s the “tax gap,” the estimated $450 billion-plus the U.S. Treasury loses annually from noncompliance to cheating. The Feds estimated, in a study several years ago, that 81.7 percent of taxpayers pay voluntarily. IRS compliance and enforcement efforts raise that to about 83.7 percent.
Meanwhile, the Republican-led Congress, which concluded the IRS had gotten too tough on right-leaning nonprofit organizations, has cut the IRS budget since 2010; from a high of $13.5 billion and 94,711 employees in 2010 to $11.5 billon and 76,832 employees last fiscal year.
Yet, IRS compliance personnel, from call-center helpers to auditors and investigators, bring in many times their salaries. The number of agents, audits are investigations are down. The number of angry taxpayers and tax preparers waiting longer to communicate with IRS is up.
Former IRS Commissioner John Koskinen estimated in a January radio interview the budget and staff cuts have caused IRS to lose several billion annually, just from fewer audits. He added that a 1 percent drop in the taxpayer-compliance rate translates into a revenue loss of $30 billion-plus a year
“If people think that others are not paying their fair share, or that they’re not going to get caught if they cheat, or they’re frustrated because they can’t get the help they need from us to file their taxes, our voluntary compliance system will be put [further] at risk,” Koskinen told the Washington Post last year.”
Vicki Petricka, a longtime IRS special agent based in St. Paul, said the purpose of the agency is to help people voluntarily file accurate returns.
The tax code is complicated. Congress, not the IRS, writes tax law.
“Many times people simply make mistakes when filing their taxes and in these cases, the IRS is understanding and works with the individual or business,” Petricka said. “When individuals or businesses deliberately and knowingly do not comply with the tax law, it is considered IRS fraud and punishable with possible jail time. IRS special agents work diligently to identify and bring to prosecution both those who evade taxes, and those who assist others in evading tax obligations.”
Meanwhile, the number of IRS investigators has declined from 3,500 in 1995 to about 2,200. There are fewer investigations. The IRS criminal division has a 98 percent conviction rate on cases charged. Nearly 10 percent of individuals convicted incur a tax loss of at least $1.5 million.
“We have the same number of special agents — around 2,200 — as we did 50 years ago,” Don Fort, chief of criminal investigation said in a recent statement. “Financial crime has not diminished. In fact, it has proliferated in the age of the internet, international financial crimes and virtual currency. Despite these challenges, we continue to do amazing work, investigating some of the most complicated cases in the agency’s history.”
This month, the IRS criminal division and the U.S. Attorney for Minnesota highlighted several folks who were convicted of tax fraud that “unfairly shifts the tax burden to honest taxpayers.”
• Joseph A. McGlynn of Burnsville, former CEO of United Credit Consulting, a credit-repair service, who was sentenced to 30 months in prison for failing to pay more than $160,000 in employment taxes for many quarters to fund what the prosecution said were luxury items, vacations and vehicles.
• Roylee, Thurlee and Lanore Belfrey of Minnetonka who failed to pay $4 million in employee-withheld taxes over many years. All three were sentenced to prison and ordered to pay millions in restitution. Their accountant, Ken Harycki, a former mayor of Stillwater, was ordered to prison for a year and to pay $2 million in restitution.
• Diane Kroupa, a former federal tax court judge from Minnetonka, was sentenced to prison, as was her husband, Robert Fackler. From 2002 to 2012, they falsely reported personal expenses as business expenses on their joint tax return. For several years, they deducted at least $500,000 of personal expenses as business expenses, and under reported their taxable income by about $1 million.
Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at email@example.com.