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GGD-94-158R 1 (1994-06-07)

handle is hein.gao/gaobackoq0001 and id is 1 raw text is: UntdStates GAOl) General Accounting Office Washington, D.C. 20548 General Government Division B-257376 June 7, 1994 The Honorable Paul Simon The Honorable David Boren United States Senate You asked us to analyze the potential revenue, costs, and feasibility of a tax compliance proposal submitted by a concerned citizen. The proposal intends to help prevent businesses from und{erreporting sales income and thus underpaying the prc:'er amount of taxes. IRS estimated that the underrepor ing of business income created at least a $38 billioi, federal income tax shortfall for 1992.' IRS recognizes the seriousness of this tax noncompliance and has planned and undertaken initiatives to increase compliance. SUMMARY OF THE PROPOSAL The proposal centers on requiring businesses to enter sales figures into portable meters at each point of sale. The meter would have a keypad for manually entering sales and would store daily sales totals in a tamper-proof 7- year memory. This meter technology could eventually be built into cash registers to eliminate the need for separate meters. Businesses would be allowed a federal tax credit to reduce the cost of the meter. When businesses prepare their tax returns, they would use this meter to print a small slip of paper showing cumulative sales for the period of the return. Businesses would be required to attach this slip of paper to their tax returns. 'This 1992 tax gap estimate totalled $35 billion for individual taxpayers involved in businesses such as sole proprietorships and partnerships and $3 billion for small corporations. Also, large corporations had a $24 billion tax gap but the portion arising from underreported income was not estimated by IRS. GAO/GGD-94-158R Feasibility of a Meter to Capture Business Income

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