The search for unreported income is always ongoing, as far as the Internal Revenue Service is concerned. Now the Treasury Inspector General for Tax Administration (TIGTA) has come out with a report that says the IRS should use currency report data to find out who has unreported income.
Banks are under an obligation to report suspicious transactions. Law enforcement uses the information to investigate white collar crimes and drug trafficking, and Orange County tax attorneys will tell you they also use this data to detect tax evasion.
What TIGTA found in its report was that by looking at currency transactions, it was possible to identify taxpayers who either, 1. had lots of cash transactions but did not file a tax return, or, 2. filed a return and reported income that was lower than their expenses, as indicated by their banking transactions. In the second case, TIGTA noted that this situation would indicate that there might be income sources that are not being reported.
Looking back at 2007 data, TIGTA’s report estimates there are around 43,000 non-filers, and that they owe over $575 million to the IRS. The report estimates around 79,000 taxpayers filed returns but underreported income, and that this group owes over $750 million in taxes penalties and interest.
The IRS agreed with TIGTA’s recommendation to make greater use of currency transaction reports, but the Service did not commit to undertaking an increase in audits. The IRS also seemed dubious of TIGTA’s estimate that $1.3 billion in tax revenue could be recovered by pursuing non-filers and underreporters based on currency reports.
Source: TIGTA “TIGTA: Currency Report Data Can Be A Good Source For Audit Leads” 11/30/2010