2001 unrealized tax gap revised to $345 billion

Filed under: Banking & Finance |

Internal Revenue Service officials announced this week that they have updated their 2001 tax gap estimates to $345 billion, and they say the complex tax code may be to blame for the disparity.

The tax gap is the difference between what taxpayers should have paid and what they actually paid.

The updated estimate of $345 billion falls at the high end of the $312 billion to $353 billion annual tax gap range.

IRS enforcement activities, coupled with other late payments, recover about $55 billion, leaving a net tax gap of $290 billion for 2001.

IRS officials admit that the complexity of the tax law is likely a factor in causing the gap and insist it’s a problem that can only be addressed in the context of fundamental tax reform.

The federal government’s 2007 budget proposal contains five legislative changes aimed at narrowing the tax gap. The proposals include:

  • Expanding third-party information reporting to include certain government payments for property and services
  • Expanding third-party information reporting on debt and credit card reimbursements paid to certain merchants
  • Clarifying liability for employment taxes for employee leasing companies and their clients
  • Expanding beyond income taxes the requirement that paid return preparers sign returns, and imposing a penalty when they fail to do so
  • Authorizing the IRS to issue levies to collect employment tax debts prior to due process collections proceedings.

Wells Fargo portfolio tops $1 trillion

Wells Fargo & Co. reported this week that its managed servicing portfolio, which includes family first mortgages and commercial mortgage loans, along with the company’s owned loans, surpassed the $1 trillion mark for the first time last year.

At the end of 2005, the company’s total managed servicing portfolio totaled $1.016 trillion.

Just five years ago, the total was less than half its current level – $468 billion.

The company’s managed servicing portfolio increased 22 percent during 2005, from $832 billion at the end of 2004.

FFIEC releases Internet security guide

The Federal Financial Institutions Examination Council has released an updated guide addressing the risks and risk management controls necessary to authenticate the identity of customers accessing Internet-based financial services.

The guidance, titled “Authentication in an Internet Banking Environment,” was issued to reflect the legal and technological changes that were included to protect consumer information

FFIEC officials noted that, with the rise in Internet crime and the increased risk to financial institutions and their customers, an effective authentication system is necessary for compliance in safeguarding customer information, preventing money laundering and terrorist financing, and reducing fraud and theft of customer information.

The guidance is divided into two parts. The main portion provides financial institutions with guidance about authentication and discusses appropriate risk assessments, customer authentication, verification of new customers, monitoring and reporting. An appendix provides details about various authentication technologies.

This guide, which replaces the FFIEC’s “Authentication in an Electronic Banking Environment” issued in 2001, does not endorse any safeguarding technology.

Community reinvestment conference dates set

The federal bank and thrift regulatory agencies will host the 2006 National Community Reinvestment Conference March 19 to 22 at the Green Valley Ranch in Las Vegas.

This year’s conference, “Winning Strategies for Community Development,” will consider community development programs that build vibrant, diverse neighborhoods with strong economies – a popular subject in light of recent changes to the Community Reinvestment Act, Hurricane Katrina and new complex financing tools.

The conference will feature information about innovations and practical examples of community development finance.

IRS to offer forums for tax pros

The Internal Revenue Service will host a series of forums across the nation this summer for the benefit of tax professionals.

The forums present the latest news and information from the IRS during three days of seminars. Representatives of the IRS, the American Association of Attorney-Certified Public Accountants, the American Bar Association, the American Institute of Certified Public Accountants, the National Association of Enrolled Agents, the National Association of Tax Professionals, the National Society of Accountants and the National Society of Tax Professionals will lead the seminars.

This will be the 16th year that the forums have been a component of the IRS’ communication and outreach efforts.

In a survey of last year’s attendees, 98 percent said they were satisfied with the program, according to the IRS.

The forums also feature a two-day expo with representatives from the IRS and tax, financial and business communities offering products, services and expertise.

For more information, visit www.taxforuminfo.com.

Rob Larimer covers banking and finance for the Colorado Springs Business Journal.