GAO Tax Gap
About GAO Tax Gap
The US tax gap is the difference between taxes owed and taxes collected on time. The IRS estimates the annual tax gap at approximately 688 billion. The gross tax gap is approximately 721 billion, with enforcement and late payments recovering about 33 billion. The tax gap represents approximately 15 percent of total tax liability. The largest component of the tax gap is underreported income, particularly for business income and capital gains. The tax gap has grown significantly, from approximately 410 billion in 2008 2010 to 688 billion in 2021. Underfunding of the IRS has contributed to the growing tax gap, as audit rates have declined, particularly for high income individuals and corporations. The Inflation Reduction Act funding for the IRS is intended to narrow the tax gap.
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