Tax fraud costs $200 billion a year

A Conversation With: Charles O. Rossotti

April 13, 2001

Internal Revenue Service Commissioner Charles O. Rossotti met at his Baltimore office last week with Richard C. Gross, editor of The Sun's Opinion * Commentary page, for a tax-time discussion of the IRS and its problems.

What problems does the IRS. have that most need solving?

We have to provide better service to the average taxpayer when they call us up or need help in filling out their return or fixing their account with us. And we're making progress on that, but we have more to do.

The other big problem is we've got to make sure that we are as effective as we can be at finding taxpayers who don't appropriately pay their taxes. Otherwise, they essentially make other people pay more.

So those are the two big things we have to do, and we can improve on both of them.

Are there more problems in tax collections now than 10 years ago, perhaps because there is more population?

Simply the fact that there is a bigger economy, there are more taxpayers, there's more complex business -- international business -- means that there are more significant problems, or at least more problems that we have to track down in terms of potential tax collections -- people who don't report accurately. And so just the growth of the economy, the complexity of the economy, the growth of things on the Internet, create a new set of problems.

There are a lot of people who have to pay to have their tax forms done for them because they find them complicated, particularly those who have to itemize deductions. Is there a way to make it simple to the point at which people can sit down and fill out a tax form in a couple of hours by themselves?

You've got two things there. One is could you change the tax code to make it simpler, and there have been many proposals to do that. But that's really a political question that depends on the president, the Congress getting together and deciding to do that.

But what we're trying to do is make it easier for the taxpayers within the limits of the codes that exist. One of the tools is the use of the computer. I mean you can actually sign on to a Web site now -- and a number of them are offered -- and have it ask you a bunch of questions. In most cases, you could do it easily in a couple of hours.

Have the computer ask you those questions and make sure that your return is correct and then push a button and send it to us, and within two or three weeks, at the most, you'll get your refund, if you have a refund. So the use of computers can make it easier, although you're still dealing with the same tax code.

Do you have an idea how much money the government is losing each year to tax fraud?

The problem is that when somebody does not pay the correct amount of tax on a return, it's very hard to tell whether it is intentional or mistaken. We do investigate for people that have very significant fraudulent returns where it's clear that they had a criminal intent, not to pay. But that's a relatively difficult kind of a case to make.

Probably the more perfect question is how much money is not paid but should be paid, if everybody paid the right thing. We don't have an accurate answer to that, but we do know that it is more than $200 billion a year.

You've been in your job for about three years. Are you happy at it?

Some days I'm happy, and some days I'm not happy. And it's probably just like most jobs. When I think that we're making a little bit of progress, you know I'm happy. When I think that we're taking a step back, which is sometimes, then I'm not as happy. But I have slightly more happy days then unhappy days.

What's it feel like to be the man in America who's in charge of taking tax money from everybody who works?

The way I look at it is that the way that democracy works is that Congress passes laws that say people are supposed to obey them. Our job is to fundamentally do two things:

One for most people who try their best to actually comply with the laws that Congress has passed. We have to try to make it as easy for them as possible.

And then we have to do something else, which is for those people (fortunately a small percentage) who don't pay what they should. It's only fair to everybody else that we try to do something about that. We try to track those mistakes down and do something to try to make those people pay. That's only fair.

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