Internal Revenue Service (IRS)Uncategorized

IRS misses $340bn of potential taxes

Over 314,000 business are reported to have been overlooked

The Internal Revenue Service (IRS) has potentially let slide tax cases from 2017 involving income from individuals and businesses worth a total of over $340bn, according to a report released by the Treasury Inspector General for Tax Administration (TIGTA).

The report found that while the business’ and individuals’ incomes have been showing up in a certain information return filed by debit and credit card providers, called a Form 1099-K, they have otherwise been unreported.

The problem arises due to the IRS not being able to use the Form1099-K data to identify which businesses and individuals are nonfilers, or whether no tax account actually exists as the account holder has never filed a tax return.

This has led to TIGTA identifying 314,586 business taxpayers and 62,087 individuals with the Form 1099-K incomes that “appeared to have a filing obligation, but were not identified as nonfilers by the IRS”.

The report added: “For [the] tax year 2017, numerous business and individual taxpayers with reporting discrepancies of at least $10,000 between the reported tax year 2017 income on the return and the Form 1099-K income were not identified by the IRS’s underreporter programs, or were identified, but not worked.”

Due partly to resource constraints centring around budget and staff shortages, the IRS is unable to follow up on all of the nonfiler cases it identifies.

While TIGTA has made seven recommendations to avoid similar situations occurring in the future, the IRS only agreed with three of them.

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