As only the General Accounting Office would put it, "There is a growing trend in the nation toward disregard for the principle of voluntary tax compliance." In other words, more and more people are cheating on their income taxes. Between fiscal 1977 and 1980, the number of delinquent accounts has grown by 66 percent and the amount owed by 135 percent, according to the Internal Revenue Service. The IRS has estimated that such losses could run as high as $97 billion in fiscal 1981, which would go a long way toward lowering the federal budget deficit.
In a new study, the GAO suggests that if the IRS wants to collect more money, it might try a different approach. IRS now examines returns from all income levels in the belief that that tends to keep people honest. But the GAO said that IRS can't really prove that, and perhaps should concentrate instead on ferreting out unreported income, which accounts for three-fourths of the tax revenue that the government is not receiving. Unreported income is hard to turn up in an audit, according to the IRS. And that's one thing Congress is going after now with a 10 percent withholding tax on interest and dividend income. Of the estimated losses for 1981, $66.1 billion is from unreported income; $12.3 billion is in overstated expense deductions and credits by individuals; $9.8 billion is on income from illegal sources; $4.9 billion is from individuals who didn't file returns; and $3.9 billion is attributed to noncompliance by corporations.
Examining returns does produce some money though: $10.75 billion in penalties and additional taxes on 1.9 million returns of all types that were examined. GAO noted that under its current approach, it cost IRS 41 cents for every $100 in tax revenues it collected in fiscal 1981.