Income tax crime and government responses in the United States 1998‐2007
| Pages | 97-106 |
| Published date | 02 January 2009 |
| Date | 02 January 2009 |
| DOI | https://doi.org/10.1108/13590790910925000 |
| Author | H. Wayne Cecil,Raymond L. Placid,Carl Pacini |
Income tax crime and
government responses in the
United States 1998-2007
H. Wayne Cecil, Raymond L. Placid and Carl Pacini
Florida Gulf Coast University, Fort Myers, Florida, USA
Abstract
Purpose – The most recent IRS estimate puts the individual tax gap at $245 billion per year. This
study seeks to develop and review performance measures for the seven most important IRS programs
aimed at reducing the tax gap.
Design/methodology/approach – The study develops and analyzes performance measures for
the last ten years. The performance measures include discovery rates, penalty rates, penalty
dollars, abatement rates, abatement dollars, collection activity rates, and criminal enforcement
activities (number of special agents, investigations, referrals, indictments, sentences, and length of
sentences).
Findings – The results are mixed regarding changes in performance measures. There was almost no
change in audit rates and increases in other IRS discovery programs. There was a steady decrease in
civil penalties for the first seven years followed by increases in latest three years. There were decreases
in abatements for most penalties, a dramatic decrease in seizures, and significant increases in liens and
levies. There were noteworthy decreases in the number of special agents and criminal investigations.
The relatively small number of criminal investigation activities is surprising given the amount of the
tax gap.
Originality/value – This study examines all major programs aimed at the individual tax gap.
Keywords Taxation, Auditing,United States of America, Performance (public administration)
Paper type Research paper
1. Introduction
The failure to comply with federal income tax laws is one of the most prevalent
financial crimes in the Unites States. The most recent federal government survey of
taxpayer attitudes found that 13 percent of people think cheating on their income taxes
is acceptable (IRS, 2008). This attitude translates into a serious problem. The most
recent Internal Revenue Service (IRS) estimate puts the individual tax gap at $245
billion per year (IRS, 2006b). The size of the tax gap has led many people to question
the ability of the IRS to effectively address the issue.
The IRS has four major discovery programs and three major enforcement programs
aimed at the individual tax gap. The discovery programs are the Audit Program, the
Automatic Underreporting (AUR) Program, the Automated Substitute for Return
(ASFR) Program, and the Math Error Program (GAO, 2005). The major IRS
enforcement programs are the Civil Penalty Program, the Collections Program, and the
Criminal Investigation Program.
Our study examines changes in performance measures for all seven programs for
the past ten years. Section II reports our results for IRS discovery activities. Section III
reports results for civil penalties and Section IV reports on penalty abatements. Section
V presents collection activities and Section VI reports criminal enforcement activities.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-0790.htm
Income tax crime
and government
responses
97
Journal of Financial Crime
Vol. 16 No. 1, 2009
pp. 97-106
qEmerald Group Publishing Limited
1359-0790
DOI 10.1108/13590790910925000
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