The Internal Revenue Service outlined the steps it plans to take to close the approximately $290 billion tax gap by encouraging more people and businesses to voluntarily pay what they owe the government, but it still faces an uphill battle.

The IRS Oversight Board has set an 86 percent voluntary compliance goal by 2009. Senate Finance Committee Chairman Max Baucus, D-Mont., has an even more ambitious 90 percent goal by 2017. One way the IRS plans to meet the goals is to reduce the opportunities for tax evasion.

To that end, the administration's budget proposal for 2008 contains 16 legislative proposals that target tax evaders. Some of the initiatives would require securities brokers and auctioneers to report more information about sales and consignments, require taxpayer identification numbers from more contractors, increase penalties, and mandate electronic filing for more large organizations.

The IRS also wants to commit more time to researching the success of its compliance efforts. In addition, the agency plans to continue improving its technology, especially in the areas of electronic filing and case selection and management. Related to that, the IRS intends to improve its compliance activities with better document matching and examination. The IRS has been investing heavily in technology to better target these efforts.

The IRS said it is also working on improving taxpayer service and simplifying the tax laws. The agency is stepping up its coordination efforts with state and foreign governments to share information and compliance strategies. But to avoid potentially abusive practices, the IRS is also coordinating with practitioner organizations in the accounting and legal professions to hear about their concerns and those of their taxpayer clients.

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