Evening star. [volume] (Washington, D.C.) 1854-1972, 1955-03-04
By Robert K. Welsh


Deliberate tax evasion is de-
creasing, but taxpayers make
far too many costly mistakes at
Government expense.
Internal Revenue Service tes-
timony expressed that view to-
day. Reports showed savings of
$40 million by refusing errone-
ously requested refunds in 1854
and $48 million by spotting mac
curacies in returns.
According to Commissioner T.
Coleman Andrews, in testimony
made public by a House Appro-
priations subcommittee, the aver
age net amount of error in in
come tax returns increased from
sos in 1858 to Sis in 1854.
And most of the taxpayers made
the faulty but generally honest
miscalculations in their own IA
vor, he added.
Mr.. Andrews said enlarged
and improved methods of selec-
tive examination of returns and
advance auditing of requested
refunds accounted for many
millions of dollars that otherwise
might never reach the Treasury.
He emphasized that more could
be accomplished with addi-
tional personnel, notwithstand-
ing recent increases in the num-
Der Of revenue agents and audi
tors.
How System Works.
Every year millions of tax
payers file returns showing that
the taxes withheld from their
salaries or the estimated taxes
they have paid during the year
exceed the amount of tax shown
on their returns" Mr.. Andrews
told the subcommittee. IF re-
funds are made before the re-
turns are audited, and subse-
quently an audit discloses the
returns were incorrect, it be-
comes necessary for us to require
those taxpayers to return part or
all of those refunds with interest.
ITO alleviate this situation, we
started in 1858 a practice of ex-
amining a part of these returns
before the refunds were made.
The results were so startling that
we more than doubled the num-
Der Of examinations in 1854. We
found in 1853 that SO out of
every 100 tax returns claiming
refunds which we selected for
examination contained tax er-
rors. Last year SO of every 100
returns of this type selected for
examination contained tax er-
rorS."
The agency now is able to
make mathematical notifications
of income tax returns on a cur
rent basis within the year they
are filed. Mr.. Andrews reported
that more than a million of the
approximately As million thus
checked during 1854 contained
errors and brought in an addi-
tional $84 million. He estimated
that this represented a return of
about $38 for every dollar spent
on salaries Of agency employees
assigned to such verification
work.
Figures Lie.
Most mistakes in returns, Mr..
Andrews explained, result from
poor arithmetic, and excessive
claims for deductions for de-
pendents and medical expenses
and for exemptions.
We regard this activity Tin
pre-auditing requested refunds
and checking returns) as not
only of great importance but
tremendous significance" Mr..
Andrews said. 1T is my consid-
cred opinion that if we do not
do a thorough job in this par
ticular area that our whole rev.
enue system would fall into al
most disrepute."
This picture of faulty tax re-
turns. Mr.. Andrews remarked, is
complicated also by a high de-
gree of noncompliance with the
requirements for the household
servants tax and to some extent
in tax provisions for self-em-
ployed persons.
But he thus described the
brighter side:
Generally speaking I feel
confident that the level of COM
pliance Is rising rather than
falling. Fortunately most of
them are natural errors. I want
everyone to know that we do
not even take punitive action
against anybody for making
natural mistake. That is what
makes me so confident that we
do not have large amount of
deliberate evasion, I mean rela-
lively large. because so many of
the errors We find are just cleri-
cal errors due to ignorance or
lack of mathematical skill or
lack of understanding the law"
The subcommittee recent