Evening star. [volume] (Washington, D.C.) 1854-1972, 1954-02-15
Errors or Fraud Noted
In So Of Every 100
Test Tax Returns
Continued From First Page.)

these returns. The results Of
this audit are indeed startling.
"Fifty-nine of every 100 re-
turns examined showed a tax
error. The most frequent source
of tax error was the erroneous
overclaiming of the personal ex-
emptions of dependents other
than children. Itemized personal
deductions were also a frequent
source of tax error. The average
tax change per return examined
was $95."
The commissioner did not
estimate the overall amount of
tax money involved. He ex-
planned that the agency was un-
able to complete the examination
of the 2 million returns before
sending out tax refunds. He said
this will eventually add to the
work of collecting and auditing
amounts owed the Government
and to the worries of taxpayers
who enormously obtained such
refunds"
Serious Trend.
Nothing that Withholding tax
refunds climbed from SIS billion
in 1850 to $2.6 billion last year
Mr.. Andrews warned:
This trend may be an indi-
cation that something serious is
happening to our voluntary
compliance system"
He said the new situation is
something we should be alert to
in order that the dangers can
be checked before it is too late"
The tax return errors. inno-
cent or otherwise, are not con-
fined to lower or middle individ-
ual income taxpayers. Mr.. An
drewS observed. Referring to
corporation, estate and gift, and
higher bracket individual re-
turns, he informed the sub
committee:
THE number of examinations
(of such returnS) last year aver
aged 124 per revenue agent.
From these 124 these men found
unreported taxes averaging over
$4,000 each. The fact that
some 4.381 man-years of exami-
nation time of revenue agents
were able to yield an average
of $260,000 per man-year, which
is well over 81 billion, is strong
evidence that a very substantial
number of taxpayers either by
resolving doubtful issues in their
favor, or by lack of knowledge,
accident or design. are making
SUI an tt a | underStatementS
about their tax liabilities.
Measures Being Taken.
Lets take another type of
analysis. From our audit sam
pling studies we estimate that II
per cent, or 100000 of the $780,
900 individual returns with BUSH
ness income falling in the $10,-
900 to 100000 income classes,
are in error. From the same
studies we estimate that about
1.3 million individual returns
without business income will fall
in the $4,000 to $50, 900 income
class, and that $50 per cent of
these returns will show tax
error upon examination. These
studies indicate the extent of
the errors on the tax returns
currently being filed"
Besides the long-range hope
Of doubling the revenue agent
force, corrective and preventive
moves already are well under
way, Mr.. Andrews said. He an
nounced that I'VE are going to
concentrate our efforts on cur
rent year returns" The agency
also will examine substantially
larger percentages of the more
productive returns. 1t will do al
it can to acquaint taxpayers with
tax return errors of the past 81
that such mistakes will not be
made from now on.
Mr.. Andrews assured the sub
committee he has confidence ir
the honesty of the vast majority
of taxpayers. But he added:
The willingness of the aver.
age taxpayer to pay his correct
tax voluntarily depends to 8
large extent on his belief that il
is his duty and the right thing
to do" he said. This willing
ness is kept high by the knowl.
edge that all others are paying
their fair share. AS others begir
to short-change on their taxes
an atmosphere of distrust anC
noncompliance is encouraged.
Priceless Asset.
1.-THE willingness to comply with
the tax law is a priceless ma.
tional asset. Under the present
level of rates and tax enforce
ment, the value of this asset is
depreciating. In the long run
it will cost the Nation infinitely
more to continue to tolerate the
depreciation than the added an
nual expense of keeping it ir
repair"
Sprinkled through the 758-
page book of testimony and
fiscal statements from So Of
f1cials of the Treasury, Export
Import Bank and the Recon
struction Finance Corp. is a
vast array of administrative
sidelightS, savings or suggestions
as well as subcommittee COM
mentS. These include reports
that:
l. The Internal Revenue Serv-
ice is saving $13.9 million from g
reduction in the number of fielC
offices. elimination or decentral-
1zation of work formerly done al
headquarters here, installation
of a new system of handling
income tax returns, and elimina-
ton Of million excise tax re.
turns annually by changing the
filing period from monthly tt