We have heard it said many times “know your customers”. Based on this premise the IRS is trying to understand factors that affect how compliant you are as a taxpayer. By focusing their questions to Schedule C filers they hope to understand what factors contribute to compliant taxpayers and what factors contribute to non-compliant taxpayers.
The IRS conducted a national survey with the help of the Taxpayer Advocate Service and a research consulting firm. I suppose the premise is if you can determine what makes taxpayers tick it will help identify which factors can influence compliance. The study focused on Schedule C filers as the IRS believes this is an area that numbers can be more easily “fudged”.
So what factors does the study say help identify high compliant taxpayers: tax morale and trust in the government, the law, the IRS, and preparers may promote compliance. Noncompliance is associated with distrust of the national government, the law and the IRS.
This seems to be quite a broad general stroke. If you had a good experience with the IRS regarding an issue and they helped you resolve it you probably feel a certain level of trust. If you felt you were treated poorly you might not feel the same way. If you feel the government spends taxes wisely and everyone pays their fair share you would be in the compliant group. These and other factors can influence trust.
Interestingly, the conclusion of the report is traditional enforcement measures designed to deter noncompliance might not be the most effective means to encourage compliance. Measures such as tax simplification, an expansion of taxpayer protections and remedies and taxpayer education could promote trust and a sense of fairness. That’s a big to do list. Unfortunately the IRS standing has taken a hit recently with the IRS being accused of playing politics. They have their work cut out as it stands now the trust factor is not going in the right direction.
Stephen Tellez, CPA