Mark J. Mazur, director of research at IRS headquarters, defined the tax gap as the difference between taxes imposed by the tax code and the amount of actual taxes paid in a timely manner. IRS estimates put the gross tax gap at approximately $345 billion for Tax Year 2001.

Efforts to reduce that amount include an increased focus on effective enforcement and collection, as well as proposed legislation to require information reporting -- and thus, improve voluntary compliance -- in certain areas. The IRS also expects to continue focusing on small businesses and self-employed individuals, one taxpayer category that seems to have a high degree of noncompliance.

"The tax gap research bears out what I see every day in real life," said Cathy Brown Peinhardt, a CPA and owner of Coast Business Services. "There are a lot of opportunities for noncompliance in the small business and self-employed population."

Legislative proposals in the works include requirements for information reporting on credit and debit card receipts by merchants; basis reporting for publicly traded securities; and making repeated failure to file a felony.

"We've been pleased to see the continued evolution from IRS. Now, the organization is much more inclined to engage and then decide," said Bob Kerr of the National Association of Enrolled Agents. "From a practitioner standpoint, that is incredibly welcome and we believe that decisions are made better through that engagement."

Improved examination processes will focus on two broad categories: balanced audit coverage based on patterns of noncompliance and examination of abusive transactions.

"We've worked very closely with Department of Justice recently," said Steve Burgess, director of examination, Small Business/Self-Employed Division, IRS. "There still remain hundreds, if not thousands, of promoter investigations that we have ongoing."

IRS officials are working to ensure that examination and collection activities work in tandem, take mutual goals into consideration, and explore better collection avenues.

"We're also challenging a lot of our assumptions about how the work flows," said David Alito, director of collection, Small Business/Self-Employed Division, IRS. "We're doing a lot of work with modeling approaches."

IRS officials and industry experts on the panel reminded tax practitioners that options such as online installment agreements and offers-in-compromise can help to bring a wayward client into compliance. Voluntary disclosure, in which a noncompliant taxpayer who has not received notification from the IRS can avoid criminal tax prosecution, can be another important option to consider.

"It doesn't avoid them having to pay the tax and the interest and potentially penalties, but it is a good program," said Mary Lou Gervie, CPA, senior tax manager, National Headquarters, Watkins, Meegan, Drury & Company, LLC. "I certainly encourage people to participate in that program."

"It's not going to make the tax go away," said Burgess. "But it does allow people to come back into the system."

A full transcript of the Webcast, "IRS Efforts to Enhance Compliance," can be accessed at www.taxtalktoday.tv. The next Webcast, "The Role of Appeals in Tax Administration," will be Tuesday, July 10, from 2 - 3 p.m. ET.