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The Widening of the Tax Gap is the IRS’s Fault, Says the IRS

Accounting Today reported on Friday:

The estimated gross U.S. tax gap increased to $496 billion annually for tax years 2014 through 2016, a rise of over $58 billion from the prior estimate — and the Internal Revenue Service estimates the gross tax gap will rise to $540 billion for 2017-2019.

“The increase in the tax gap estimates reflects that the IRS needs to do more, both in improving taxpayer service as well as working to improve tax compliance,” said outgoing IRS Commissioner Chuck Rettig in a statement Friday. “The recent funding addition will help the IRS in many ways.”

The gross tax gap is the difference between estimated true tax liability for a given period and the amount of tax that is paid on time. The gross tax gap comprises nonfiling (taxes that were not paid on time by those who do not file on time — $39 billion); underreporting (taxes understated on timely filed returns — $398 billion); and underpayment (taxes that were reported on time, but not paid on time — $59 billion).

Maybe that militia of ravenous IRS agents the agency is putting together will scare Americans into compliance and the tax gap will start to close in future years? Nah, probably not.

Estimates of the tax gap keep growing [Accounting Today]

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1 Comment

  1. How do we know the “tax gap” is $496 billion per year? Because the IRS said so. Could the IRS have disclosed this “gap” to provide a rationale to increase its budget? Why is any IRS number accepted uncritically?

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