Although you won't find it in the newly enacted $98.3 billion tax bill, the Internal Revenue Service's "wish list" of revenue helpers includes the recall of $100 bills, discounts for people who pay their taxes on time, rewards for those who turn in tax cheats and a plea for voluntary contributions to help reduce the national debt.
The options for "closing the gap" on unreported individual income were written by the IRS last fall. The paper includes several provisions incorporated in the tax bill passed Thursday and sent to President Reagan for signature, such as withholding on interest and dividend income and tightening reporting of restaurant tip income.
The National Law Journal obtained the "confidential" report sent from Commissioner of Internal Revenue Roscoe Egger to Treasury Secretary Donald T. Regan and plans to describe it in its Monday edition. Portions were made available to The Washington Post.
Marlin Fitzwater, a spokesman for the Treasury Department, said yesterday that the report is "an intellectual laundry list" of ideas that Regan sought last fall. The suggestions not contained in the tax bill passed Thursday are not under active consideration, he said.
The options paper, however, illustrates some of the enforcement problems facing the IRS and its proposed solutions. For example, it suggests:
* Recalling $100 bills to change their color, or discontinuing them. The idea is to use the exchange to identify and catch criminals, such as drug pushers, gamblers and other tax evaders, who make big cash deals.
About 40 percent of the $125 billion in currency in circulation is in $100 bills. The proportion has increased rapidly over the past decade, the IRS report said.
"This increase has occurred in spite of the fact that the ordinary American probably has less need now than ever for big bills" because of increasing use of credit cards and other non-cash instruments, the report added. A recall, it went on, would force criminals to use alternative means of moving illegal funds and "would put a crimp in the underground economy."
The IRS analysts also viewed the move as a new way to fight inflation, figuring that the $100s not exchanged would reduce the money supply "with a salutary effect in a time of inflation."
* Refunding a portion of the income tax to those who pay on time. But the report points out that this would be expensive, most people pay on time anyway and some might question "the desirability of paying citizens for complying with federal tax statutes."
* Increasing the maximum IRS reward from $50,000 to $250,000 for turning in tax cheats and appealing to the public to inform on those who don't pay their taxes. "Historically, the service has chosen not to publicize the willingness to pay rewards, primarily to prevent the appearance of encouraging citizens to 'spy' and inform on each other," the report said.
While the idea might help enforcement, "The service may get flooded with a tremendous amount of useless information from individuals hoping to strike it rich," it noted.
* Adding staff so that more dunning notices could be sent to under-reporters. Recent figures show that the IRS is following up on only 35 percent of the returns it identifies, by matching them with dividend and interest reports from banks, as underreporting income. However, most of the follow-up notices are for additional tax payments of less than $500.
* Searching real estate records to find unreported interest income from individual home sales. The increasing use of "creative financing," such as the seller taking back a mortgage, "has created a potentially serious compliance problem" because many sellers don't report the interest in the payment as income. This could raise nearly $200 million in 1984, the report said.
* Checking state tax-refund computer tapes to find taxpayers who didn't report the refunds as income on their federal returns. By 1984 it is estimated that $327 million in such refunds will go unreported to the IRS.
* Screening returns that claim refunds to check for signs of the tax protester movement. While called statistically insignificant, the movement "establishes a climate which fosters the decline in the level of voluntary compliance," according to the report.
* Proclaiming a one-year "amnesty" for taxpayers who voluntarily disclose past fraudulent conduct and offering immunity from prosecution if they pay up. (Such a program was tried but abandoned in 1952 because some of those granted immunity defaulted on their liabilities and couldn't be prosecuted.) This would be an attempt to reduce the magnitude of the underground economy, but law-abiding taxpayers might see this "special" treatment as unfair, the report said.
* Providing space on tax forms for voluntary, non-deductible contributions toward reducing the national debt.
Any reduction of the trillion-dollar debt would help, the report said. But it added:
"Taxpayers might view this as a desperate effort by a government that can't come up with any better solutions to its financial problems, and ignore this plea. They might also decide that a government this desperate is unable to enforce its tax laws adequately, thus taxpayer non-compliance problems might increase."