Inter-American Center of Tax Administration General Assembly Quito, Ecuador Taxpayer Attitude and Tax Administration: Differentiating and Classifying Behaviors Steve Miller Deputy Commissioner for Services and Enforcement Internal Revenue Service United States of America April 2011

Scope and Content What the Data Shows Introduction Scope and Content What the Data Shows Legislative/Administrative Actions Taken Using Third Parties and Third Party Data

The Importance of Visibility What the Data Shows The Importance of Visibility Taxpayer Compliance Measurement Program (TCMP) National Research Program (NRP)

Individual Income Tax Underreporting Gap What the Data Shows…..Tax Year 2001 Individual Income Tax Underreporting Gap Misreporting of Income and Offsets by “Visibility Categories Net Misreporting Percentage Underreporting Tax Gap I. Amounts subject to substantial information reporting and withholding II. Amounts subject to substantial information reporting III. Amounts subject to some information reporting IV. Amounts subject to little or no information reporting Based on estimates derived from the TY2001 National Research Program reporting compliance study

IRS Organizational Structure Legislative and Administrative Actions Taken IRS Organizational Structure Wage and Investment (W&I) Small Business/Self-Employed (SBSE) Large Business and International (LB&I) Tax Exempt and Gov’t Entities (TEGE) Enterprise Approaches – Global High Wealth Industry Group

Information Reporting Efforts Legislative and Administrative Actions Taken Information Reporting Efforts Government Payments to Contractors Merchant/Payment Card Reporting Basis Reporting for Securities Dealers Payments to Individuals and Corporations Payments Related to Rental Real Estate Foreign Account Tax Compliance Act Uncertain Tax Positions

Tax Return Preparer Initiative Using Third Parties and Third Party Data Tax Return Preparer Initiative Registration, testing and continuing education for tax preparers Letters and/or visits to selected tax return preparers Goal: increase quality of tax returns

Whistleblowers Legislatively mandated Using Third Parties and Third Party Data Whistleblowers Legislatively mandated Increased number of high dollar cases Nearly 50% -- large corporate issues

Automated Underreporter Process Using Third Parties and Third Party Data Automated Underreporter Process Challenges of more 3rd party data Supporting IT systems Business processes that use the data Many millions of potential cases/year Resolve discrepancies between 3rd party reporting and taxpayer reporting Alternative approach: “soft” notice

Use of Other Data Key work area: Using Third Parties and Third Party Data Use of Other Data Key work area: what data to acquire and how to use it Teams working on matching/analytic tools Data mining for research, case selection and case audit Will start with merchant/payment card data

Conclusion The IRS Mission Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.