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IRS Reports Tax Gap Of $300 Billion
By: Richard Chapo
The Internal Revenue Service is reporting that the difference between what U.S.
taxpayers owe and actually pay on time totals more than $300 billion a year.
Studying over 46,000 tax returns for individuals revealed the tax gap. These
results indicate a failure of 15 to 16 percent of individual tax payers to fully
pay their taxes. IRS enforcement activities recovered roughly $55 billion of
that total gap, leaving a net tax gap of $257 billion to $298 billion.
The tax gap is comprised of three components -- underreported income,
underpayment of taxes and failure to file tax returns at all. 80 percent of gap
was due to individuals underreporting their income, while non-filing and
underpayment accounted equally for the remaining 20 percent.
The IRS reported that underreporting was mostly linked to understated income,
not overstated deductions. The agency also determined that most of the
understated income was related to business activities, not wages or investment
income.
While these figures may appear shocking, they more or less match the results
found in a 1988 study. The numbers are also artificially inflated by individuals
that fail to file returns and pay taxes. The IRS is not expected to take any new
course of action based on these results.
About the Author:
Richard Chapo is CEO of
http://www.businesstaxrecovery.com - Obtaining tax
refunds for small businesses by finding overlooked tax deductions and credits
through a free tax return review. |
