The Adequacy Of The Current Deterrence Model Of Tax Compliance

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1. Discuss the adequacy of the current deterrence model of tax compliance based on a combination of penalties and rate of audits. Does it provide the proper balance in light of our “voluntary compliance” system in the United States? The federal tax system in the US is founded on the principle of self-assessment. Self-assessment is also referred to as voluntary compliance. The IRS does not compute taxpayers tax liabilities but the Code requires taxpayers to determine their own tax liabilities. The IRS enforces the tax laws through audits, civil tax penalties, and a number of tax collection tools. An example is seizure of property. The overall voluntary compliance rate with respect to federal taxes is estimated to be around 84 percent. To…show more content…
The majority court reasoning stated the petitioner alteration of the Form 1040 had the net effect of the creation of zero tax liability. The irregularities created by the petitioner force the IRS to handle his return by special procedures and must be withdrawn from normal processing channels. The court determines whether a document is sufficient for statute of limitations purposes by there must be sufficient data to calculate tax liability, the document must purport to be a return, there must be an honest and reasonable attempt to satisfy the requirements of the tax law, and the taxpayer must execute the return under penalties of perjury. Base on Revenue Procedure section 3.04 (1) & (2) the taxpayer never received prior approval to change the IRS tax form 1040. 3. Again, in Beard v. Commissioner, 82 T.C.766 (1984), Judge Chabot disagreed with the majority’s decision. What was the basis of his dissent? Judge Chabot disagreed with the majority’s decision in Beard v. Commissioner in reference to the Supreme Court decision during 1984 in Badaracco v. Commissioner case. The Supreme Court decision stated a document which on its face plausibly purports to be in compliance, and which is signed by the taxpayer, is a return despite its inaccuracies. The petitioner cited Zellerbach Paper Co. v. Helvering case decision where
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