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I.R.S. Penalties Are Too Low
Because many penalties are not adjusted for inflation, reducing the deterrent effect of fines, says the Government Accountability Office in a report released today.
The inflation-corrected value of some penalties has fallen by more than 50 percent since they were last adjusted.
For example, the current penalty on failure to file a partnership return is $50 per partner per month. This was last readjusted in 1979. So in today's dollars, compared with 1979 dollars, the value of the penalty is $18. If the fine had been allowed to keep up with rising prices it would be nearly three times greater at $145 per partner per month.
The G.A.O. estimates that an additional $60 million in fines could've been collected in 2004 if four penalties were readjusted for inflation:
| Penalty | Current Penalty Amount | Penalty Amount, Adjusted for Inflation |
| Failure to file | $100 minimum | $214 minimum |
| Failure to file correct information returns | $15, $30, or $50 per return | $25, $50, or $83 per return |
| Various penalties on returns by exempt organizations and by certain trusts | $20 or $100 per day | $26 or $131 per day |
| Failure to file partnership returns | $50 per partner per month | $145 per partner per month |
The report recommends that Congress consider requiring the I.R.S. to periodically adjust fines for inflation.
