Washington — Is the Internal Revenue Service a toothless tiger? The question sounds far-fetched when millions of taxpayers - many driven by visions of steely-eyed auditors eager to exact a penalty for every minor error - will spend this weekend scrambling to meet the April 16 filing deadline.
But critics, including several former top IRS officials and an American Bar Association (ABA) panel, contend the tax system is in danger of being overwhelmed by various kinds of tax cheats. The Bar Association report says the United States could become ''the first great power to falter because it lost its ability to collect taxes.''
IRS figures show that the difference between what the IRS says taxpayers owe and what citizens actually pay has risen to nearly $100 billion, a 226 percent increase since 1973.
At a breakfast meeting with reporters yesterday, IRS Commissioner Roscoe Egger argued that the tax system is not in danger of collapsing. But he was clearly troubled by findings from a preliminary IRS public-opinion survey that indicates that tax cheating is increasingly seen as normal.
To cope with growing compliance problems, the service is stepping up the use of computers to match so called information returns - reports on a worker's income filed by his or her employer, bank, and broker - with what the taxpayer reports.
By 1985, the number of information returns the service processes is expected to soar 50 percent, to 900 million.
Meanwhile, the IRS is at work on a complete redesign of its computer system. By gathering more information on state income taxes, property taxes and mortgage payments, the new system ''could do an instant audit'' on all individual returns , Egger says. Such a system will not be in use until the latter part of the decade, he adds.
The IRS currently checks all returns for math and other obvious errors.
But only a tiny fraction - some 1.36 percent of returns filed this year - will receive a full-scale audit in which deductions and other items are checked line by line. The odds of an audit are higher for those with incomes over $50, 000, Egger notes.
Despite the challenges the IRS faces, ''in no sense of the term do I think we are losing the war'' against tax abuse, Egger says.
He stressed the agency's recent aggressive initiatives against tax shelters, a transaction designed to produce large deductions that can protect other income from taxation.
But the commissioner, a former partner at the accounting firm Price Waterhouse & Co., adds, ''I can't tell you the tax gap is not getting bigger.'' He cautions, however, that the 1983 tax gap estimate is extrapolated from 1979 data.
Administration of the tax system would be aided if Congress would simplify the tax code, he points out.
''We've got complexity on top of complexity,'' he says. The tax code already takes up 5,000 pages and a tax bill that recently cleared the Senate Finance Committee contains 1,335 additional pages of tax-law changes.
Perhaps bewildered by all this complexity, taxpayers have been slower filing returns this year than last. Roughly 55 million of the expected 97 million tax-year 1983 returns have been filed. ''Every year taxpayers file a little more slowly than they did the year before,'' Egger says. He has already filed and presumably everything is in order since he has asked for an annual audit.
Changes in public attitudes towards tax cheating appear to be a key factor in the trend toward lower compliance by other taxpayers.
By the end of April a public opinion survey firm will contact some 2,000 taxpayers to ask what they feel about the tax system. Preliminary interviews conducted in four cities show some troubling trends.
''People are rationalizing what is being done on the tax return,'' Egger says. He says the feeling seems to be that ''everyone else is cheating so I am entiled to it too. It's a game we play and you get away with whatever you get away with.''
Egger says preliminary research shows ''there is a strange consensus. They felt that people whose incomes were not subject to withholding, that everybody in that group would cheat.
''There is also a feeling that tax cheating isn't really a criminal offense and that people who cheat aren't really criminals . . . and if they got caught, then the IRS is just too tough.''
Egger contends that such attitudes do not necessarily prove that tax cheating is taking place on a massive scale.
It is a ''perception problem,'' he says. People think others are cheating, but there is a smaller number of people actually shortchanging the IRS ''than might be perceived,'' he says.
He attributes a large share of the tax gap to inadvertence - a large number of taxpayers forgetting to report some small item like the interest on a small savings account. Intentional fraud, or what Egger calls greed, is the tax gap's other major cause.
The widesprad acceptance of cheating, even if it is cheating by others, constitutes a major long-term problem for the IRS, outside experts say. And the IRS runs the risk of encouraging greater noncompliance if it says too much about the problem.
''The IRS is very well aware that a major problem is the question of the increasing reluctance of people to comply voluntarily,'' says Arnold Brown, a New York consultant on the implications of social change who has worked with the IRS. ''They know, as everyone knows, that voluntary compliance is the only way it can be done.''
IRS Commisioner Egger notes that a huge number of taxpayers have relatively little chance to cheat since they are paid a salary from which taxes are withheld and do not itemize deductions for mortgage interest or other expenses.
''Forty million people don't even file a Form 1040,'' Eggers says. They file one of the abbreviated forms and ''have limited amount of income other than wages and salary.''