The estimated tax gap calculates the difference between the amount of taxes collected and paid on time and the true tax liability. The projected tax gap for 2022 is $696 billion; $200 billion more than in 2014 through 2016. The tax gap looks at three main areas: non-filing, underreporting, and underpayment. In 2022, non-filing made up 9% of the tax gap, underreporting was 77%, and underpayment was 14%.
However, compliance rates were calculated to be 85%, meaning the vast majority of taxpayers voluntarily filed and paid taxes on time. This is consistent with the calculations found with the tax gap projections. The IRS is hopeful that the tax gap will decrease, and compliance will increase due to the additional compliance efforts put in place after the passing of the Inflation Reduction Act.
To read further about the tax gap and the ongoing compliance efforts, click here.
