The U.S. experienced a record $688 billion tax gap in 2021 as taxpayers didn't meet their obligations. The IRS announced plans to intensify audits and enforcement to bridge this deficit.
Of this total, $542 billion resulted from unreported income, while the rest of the deficit was attributable to individuals who either failed to file returns or neglected their tax obligations.
Compared to estimates for the 2017-2019 tax years, the tax gap increased by over $138 billion, primarily driven by economic growth. The shift from wage income to gig economy jobs with lower compliance contributed to this rise.
This report coincides with the IRS intensifying audits of high-income taxpayers and securing funding from the Inflation Reduction Act to enhance taxpayer service and enforcement.
Taking into account anticipated IRS compliance actions and late payments generating $63 billion, the projected net tax gap for 2021 stands at $625 billion.