WASHINGTON â The U.S. Internal Revenue Service needs additional tools beyond audits to find individuals and businesses that are underpaying their federal tax bills, a former commissioner of the agency told a congressional panel on Tuesday.
âSimply scaling up what the IRS does today will not produce the desired results,â Charles Rossotti said at a Senate Finance subcommittee hearing. âAs important as audits are, currently, all of IRS audit activity only recovers about 2.5% of the tax gap.â
Rossotti, who was IRS commissioner from 1997-2002, said the agency requires more information about bank account flows for high-income taxpayers and upgraded computer systems that could process that data. That would help find income thatâs earned through pass-through entities, such as partnerships, where there isnât strong third-party reporting and taxpayers can more easily hide their money, he said.