The IRS is pursuing fewer tax evasion cases than ever before, according to a recent New York Times report, with tax fraud cases dropping by nearly a quarter since 2010.
A primary factor in the decline is budget cuts:
> Starting in 2011, Republicans in Congress repeatedly cut the I.R.S.’s budget, forcing the agency to reduce its enforcement staff by a third. But that drop doesn’t entirely explain the reduction in tax fraud cases.
The bulk of criminal cases pursued by the IRS in recent years has more to do with drug trafficking and money laundering, The Times said.
> “Due to budget cuts, attrition and a shift in focus, there’s been a collapse in the commitment to take on tax fraud,” said Chuck Pine, who used to be the third-ranking criminal enforcement officer at the I.R.S. and is now a managing director at BDO Consulting. “I believe there are thousands of individuals who have U.S. tax obligations and are not complying with U.S. tax laws.”
> The result is huge losses for the government. Business owners don’t pay $125 billion in taxes each year that they owe, according to I.R.S. estimates. That’s enough to fund the Departments of State, Energy and Homeland Security, with the National Aeronautics and Space Administration tossed in for good measure. Unlike wage earners who have their income separately reported to the I.R.S., business owners are often on the honor system.
Americans holding their wealth offshore is also problematic, and although some progress has been made in this area over the past year, the issue continues generating problems for the IRS.
In 2010, President Barack Obama signed a law providing a new tool for auditors and prosecutors to combat the practice of hiding wealth overseas, but so far that law has gone virtually nowhere, The Times reported.
> That law, the Foreign Account Tax Compliance Act, required banks with American account holders to report information to the United States. Like W-2 forms that employers file to tell about their workers, these reports would force account holders to come clean.
> Eight years later, the program is still getting off the ground. Countries around the world have signed agreements, and more than 100,000 foreign banks have sent information to the United States. But “there is no ongoing compliance impact of the FATCA at this time,” according to a report this year by the inspector general for the I.R.S.
> Here, too, the cuts to the I.R.S.’s budget have had an impact. During the Obama administration, the I.R.S. asked Congress for hundreds of millions of dollars to carry out the program, but received nothing. Since Mr. Trump took office, the agency has stopped asking.