IRS COMMISSIONER, MARGARET MILNER RICHARDSON
APRIL 15, 1996
With Monday April 15th being the final day to submit your taxes, Margaret Warner went right to the top for advice, IRS commissioner Margaret Milner Richardson.
MARGARET WARNER: For many Americans, this is one of the least loved and most harried days of the year, the deadline for filing income taxes. For an update on how the process is working this year and how technology is changing the way people file their taxes, we're joined by IRS Commissioner Margaret Milner Richardson, who has led the agency since 1993. Good evening, Commissioner Richardson.
MARGARET MILNER RICHARDSON, IRS Commissioner: (Philadelphia) Good evening, Margaret. How are you?
MARGARET WARNER: Very well. Thanks for being with us.
COMMISSIONER RICHARDSON: Thank you.
MARGARET WARNER: We're five and a half hours before the midnight deadline. Give us an update. How many people have already filed? How many are you expecting in these final hours?
COMMISSIONER RICHARDSON: Well, we've had about 67 million people who've already filed this year, and in these final few days and hours, we're expecting anywhere from thirty-six to thirty-eight million people to file returns, and then another six or few more million who will be asking for extensions.
MARGARET WARNER: And how many of these individuals, what percentage use accountants or outside preparers?
COMMISSIONER RICHARDSON: Well, based on polling information, approximately half of the people do use a preparer. Not all really need to, but indications are maybe half the people go to a preparer.
MARGARET WARNER: Let's turn to a favorite topic, refunds.
COMMISSIONER RICHARDSON: Right.
MARGARET WARNER: What percentage--last year you had some problems with refunds, some delays. Have you, have you ironed those out? What percentage of taxpayers get refunds and how long does it take to get them?
COMMISSIONER RICHARDSON: Margaret, we--last year we slowed the process down. As you many recall, we had some problems with refund fraud in prior years, and we wanted to assure that refunds were only going to the people who were really entitled to them, so we did slow that process down. It was very successful. We actually lost a million and a half dependents last year and stopped about a half--
MARGARET WARNER: Just magically?
COMMISSIONER RICHARDSON: Just magically. And stopped about 1/2 billion dollars in refunds from going out the door that shouldn't have gone, so we think it was a successful effort. This year has been much smoother. We've already paid out quite a number of refunds, over 40 million, and the average amount of the refund has gone up this year to about $1200.
MARGARET WARNER: Now, why has the average amount gone up?
COMMISSIONER RICHARDSON: Well, I think it's gone up because of the indexing for exemptions. We're not exactly sure. And sometimes people adjust their withholding so they can get a larger refund. We don't encourage that. In fact, we'd like to see people break even so that we don't them money and they don't owe us money, but people do tend to use as a way of savings.
MARGARET WARNER: All right. Now, how many people do you believe do not file at all who should file?
COMMISSIONER RICHARDSON: Well, several years ago, we estimated that there were probably about ten million non-filers, seven and a half million individuals and two and a half million businesses. We have had an active non-filer program to encourage people to come in and file, and we have--
MARGARET WARNER: Sort of an amnesty program?
COMMISSIONER RICHARDSON: Well, we're not really an amnesty, because you still owed the tax, but what we did tell 'em is if they'd come in and file, and they contacted us before we contacted them, then in most cases we wouldn't prosecute. We've gotten ironically about a third of those people actually were getting refunds, so the reasons for not filing probably weren't too clear to a lot of people.
MARGARET WARNER: Now what about compliance? What percentage of Americans do you think cheat on their taxes in some form or other?
COMMISSIONER RICHARDSON: Margaret, we think that the vast majority of the people really are honest and do file or try to file accurate returns. You often hear that--a number of 86 percent compliance level. And that's an estimate based on the dollars that we think are collected. We believe that we collect about 86 percent of the dollars that are due and owing, about 83 percent come in voluntarily, and then our enforcement actions bring in another 3 1/2 percent every year.
MARGARET WARNER: And auditing, how do you decide who you audit and what percentage of taxpayers get audited?
COMMISSIONER RICHARDSON: Well, we have an audit coverage rate of about 1.4 percent probably this year, and we have a score based on a number of factors that take into account deductions and income and likelihood of non-compliance. And so we select returns for audit based on a number of factors.
MARGARET WARNER: I heard on one news account today that your chances of being audited were higher if you filed late, say tonight, is that true?
COMMISSIONER RICHARDSON: No, that is not true. In fact, I did hear the same report, and I was interested. I was sorry I wasn't able to speak to that person, because when you file has absolutely nothing to do with whether you'll be audited. A lot of people think that if they use the label that comes with their tax package that they'll be audited or have a higher likelihood of being audited, and that's not true either. That information is used to process the return more quickly and frequently to process a refund more quickly.
MARGARET WARNER: Let me ask you about another news report, and this was in the New York Times yesterday. It said there was a great unevenness in whether you got prosecuted for tax fraud, depending on where you lived, and that, for instance, if you lived in Ronoake, Virginia, that was the number one place to live to have a likelihood of being prosecuted, fifty-seven times higher than if you lived in New Mexico. Why?
COMMISSIONER RICHARDSON: Uh, Margaret, I think one of the fallacies in that article was it really focused just on a one-year period, and when you're looking at prosecutions, you need to look at several years, because, because there are year-to-year distortions. The other thing I think that was pointed out in that article is that that was not just tax crimes but also involved referrals for prosecution on money laundering and, as well as some threats against IRS employees, so there--I think you really need to parse through the numbers and also look at a several year period.
MARGARET WARNER: But do you think it is even-handed or some people in better shape depending on where they live?
COMMISSIONER RICHARDSON: Well, we certainly have, try to have uniform standards across the country, but frequently and I think the Justice Department U.S. attorneys are in positions to ultimately decide whether or not they can prosecute, so there is a possibility that you could have some unevenness, but we really do try to, to keep that out of the system. And I think we do a good job of that working closely with the Justice Department.
MARGARET WARNER: All right. Let's turn to this tax system modernization that IRS has been--had underway for about five years. How are you trying to change the way people file, and how much progress have you made so far?
COMMISSIONER RICHARDSON: Well, we're, we're very much interested in having people engage in electronic commerce, and that means both filing tax returns electronically, as well as making payments electronically. We now have the largest employers in this country are making their federal tax deposits electronically. Over the last several years, we've gone from nobody being able to do it, to I think over 50,000 employers who do that today. We're receiving several hundred billion dollars that way. And the number continues to increase every day. We're also looking at a number of options for electronic filing. We have 2.6 or 7 million people who filed by telephone this year. That means that in less than 10 minutes and any time of the day or night, they were able to file using their touchtone telephones. We've got what we call online filing, where people can use tax preparation software, and that's being expanded, was expanded this year, and will be expanded next year. We're looking at a whole host of options, but we'd like to get the paper out of the system. It's a more accurate way to file, and when you file an accurate return, it means you probably won't have to hear from us again until next year.
MARGARET WARNER: Now, the General Accounting Office and the Republicans of Congress have been very critical about the pace and sort of sophistication or they say lack thereof in this modernization, and the Republican Congressman who oversees--head of the Committee who oversees the IRS said there was a $4 billion fiasco and that really you all just--you were buying the wrong computers, things weren't compatible, you weren't taking care of the confidentiality of people's private information. What do you say to all those criticisms?
COMMISSIONER RICHARDSON: Well, our, our tax system's modernization program is really a series of projects, and it's been underway or in the planning stages for several years, and we've always targeted the year 2000 to complete the biggest part of that process. We're, as I said, providing more options for taxpayers to file electronically than ever before. We have acknowledged some of the criticisms. We think that we do an excellent job of delivering filing seasons every year and programming our computers, but we are doing more with private contractors in developing our software for the new system. We're also very concerned about security and privacy. Those are things that we take very seriously, and we are building in the utmost in security into our new system. So I don't think tax preparers need worry about our commitment to having the safest and securest system possible.
MARGARET WARNER: Well, Commissioner Richardson, thanks for being with us.
COMMISSIONER RICHARDSON: Margaret, thank you very much.