NCPA - National Center for Policy Analysis

IRS Estimates Of Accounts Receivable

July 21, 1998

The Internal Revenue Service has reported that Americans fail to pay taxes amounting to $195 billion a year. IRS officials have also said cumulative unpaid taxes -- or accounts receivable --exceeded $216 billion as of the start of fiscal year 1997.

The General Accounting Office, however, disputes those figures.

  • According to the GAO, $76 billion of accounts receivable consisted of write-offs owned by bankrupt or defunct businesses going back to the 1960s -- including the obligations of many failed savings and loan institutions that have long been closed.
  • Another $48 billion consisted of compliance assessments that haven't been agreed to either by taxpayers or courts.
  • The GAO judges an additional $62 billion is uncollectable because taxpayers are unemployed or too poor to pay.
  • Although the IRS claimed only 30 percent of the accounts receivable reflected accrued interest and penalties, the GAO says the proportion is actually over 60 percent.

The GAO concludes that only about $28 billion of federal taxes receivable could be collected.

Experts say that when the IRS investigates a firm it often identifies several individuals in the company as "responsible parties." Then it seeks to collect from each party the entire amount of taxes the company owes -- whether the bill has already been paid or not.

In 64 percent of the cases the GAO examined "involving multiple individuals and companies," it found that "payments were not accurately recorded to reflect the reduction in the tax liability of each responsible party."

Source: James Bovard, "You Still Can't Trust the IRS," Investor's Business Daily, July 21, 1998.


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