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In 2022, the latest year for which data is available, the IRS collected more than $4.9 trillion in taxes, penalties, interest and user fees. With the help of Inflation Reduction Act resources, the IRS will be taking a variety of steps to help improve voluntary compliance by improving taxpayer services and offering new technology tools to work in concert with additional compliance work. $68 billion in tax year 2021, up from $64 billion in tax years 2017-2019.Underpayment, or tax that was reported on time, but not paid on time).$542 billion in tax year 2021, up from $445 billion in tax years 2017-2019.Underreporting, which reflects tax understated on timely filed returns.$77 billion in tax year 2021, up from $41 billion in tax years 2017-2019.Nonfiling, which means tax not paid on time by those who do not file on time:.The gross tax gap comprises three components: This drop in compliance does not factor in any changes in compliance behavior instead, it is due to changes in the types of income and how that income is reported to the IRS. After IRS compliance efforts are factored in, the projected share of taxes eventually paid is 86.3% for tax year 2021, down slightly from the 87.0% for tax years 2014-2016. The tax year 20 tax gap projections translate to about 85% of taxes paid voluntarily and on time, which is in line with recent levels. Voluntary compliance rate remains relatively steady Much of these increases in tax liability and the tax gap can be attributed to economic growth.
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Between tax years 2014-2016 and tax year 2021, the estimated tax liability increased by about 38 percent, roughly the same increase as the gross and net tax gaps. Late payments and IRS enforcement efforts are projected to generate an additional $63 billion on tax year 2021 returns, resulting in a projected net tax gap of $625 billion. That estimated compliance behavior is projected forward to taxpayers in tax years 20.
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In addition, the projections released today are based largely upon the compliance behavior estimated from the most recent set of completed audits (from tax years 2014-2016). The IRS notes that the tax gap estimates and projections cannot fully account for all types of noncompliance. The gross tax gap covers three key areas – nonfiling of taxes, underreporting of taxes and underpayment of taxes. The $688 billion 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. "These steps are urgent in many ways, including adding more fairness to the tax system, protecting those who pay their taxes and working to combat the tax gap." Tax gap details: late payments and IRS enforcement generated $63 billion in 2021 "With the help of Inflation Reduction Act funding, we are adding focus and resources to areas of compliance concern, including high-income and high-wealth individuals, partnerships and corporations. "This increase in the tax gap underscores the importance of increased IRS compliance efforts on key areas," said IRS Commissioner Danny Werfel.
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This marks the first year tax gap projections have been provided for single tax years and also marks the beginning of tax gap updates on an annual basis. The new estimate reflects a rise of more than $192 billion from the prior estimates for tax years 2014-2016 and a rise of $138 billion from the revised projections for tax years 2017-2019. WASHINGTON - The Internal Revenue Service today released new tax gap projections for tax years 20 showing the projected gross tax gap increased to $688 billion in tax year 2021, a significant jump from previous estimates.