Lots of the tax returns that a business has to file are "information returns" (such as forms W-2, 1099 and K-1). The returns report revenue or income that the filer is aware that someone else has received. No tax is due from the filer, although there is a penalty due if the return isn't filed on time (that can be abated in some circumstances).
Empirically, information return filing dramatically increases compliance by the person whose information is reported. But, this generates work for the party that files the return and is unlikely to be caught if there is non-compliance.
How could the IRS encourage filers to file returns? What if there was a reward assigned to every time that an information return identified taxable income that was not reported by the person identified in the return?
Alternately, should those who file information tax returns, at least, be entitled to some compensation for preparing them for the benefit of the IRS, much like vendors who collect sales taxes sometimes do?
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