IRS, with a bipartisan agreement to give more money to combat tax cheating, is trying to reduce the $290 billion a year “tax gap”.

The idea is to squeeze money out of those who owe taxes rather than raising taxes especially in an election year.

One significant proposal that has a unanimous consent is the one that would require many brokerage houses, mutual founds or other institutions to report to the IRS what investors pay fro stock and other securities.

Many companies already keep track of such data for customers but they are not required to do so or report it to the IRS.

This proposal, if enacted, would improve compliance on capital gain taxes and would raise an estimated $7.5 Billion over 10 years.

In addition Congress is expected to increase the IRS’s budget especially for audits of high income taxpayers and self-employed workers. Spending on enforcement would rise more than 7%.

The lawmakers are pressing the IRS to increase the nation’s overall tax compliance rate that in 2001 was 86%.

One way to improve compliance, according to treasury officials, is to require cost-basis reporting.

For long time officials have suspected some investors of overstating their costs and thus underpaying taxes.

The plan would have a positive side effect which is make it easier for law –abiding investors to keep track of their costs.

According to Tim Hanford, a tax-policy consultant and a White House Ways and Means committee staffer, there will be some administrative difficulties in getting the basis-reporting rules implemented but will provide good enforcement tool to collect tax due on security sales.

The Treasury proposal, if approved, would apply to securities acquired after the end of 2009.

Beside this proposal the Bush budget include increased criminal penalties for “willful” failures to file tax return.

The President proposes elevating this offense to a felony from a misdemeanor. Also this proposal would be effective for returns filed on or after January 1^st 2009.

According to a recent survey of 165 tax and finance executives by Miller & Chevalier (Washington Law Firm) we should not expect many major tax changes this year except reviving a law allowing tax-free transfers from IRS to charity.