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Revised Tax GapPosted Tuesday, January 10, 2012, at 7:06 AM
The IRS recently released new statistics on the tax gap. The tax gap is the difference between the amount owed to the federal government and the amount paid by taxpayers. The tax gap is further broken down into 3 categories: non-filing, underreporting and underpayment.
The new estimate (based on 2006 tax data) compared to the previous 2001 estimate shows that taxpayer's compliance rate is essentially the same (approximately 83%). The voluntary compliance rate is the percentage of total tax revenues paid on a timely basis. The new tax gap is $450 billion compared to $345 billion in 2001. The tax gap exceeded the federal deficit in 2006.
The following table (from the IRS) summarizes the 2001 and 2006 tax gaps:
Underreporting of income continues to be the largest contributing factor to the 2006 tax gap accounting for an estimated $376 billion compared to $285 billion in 2001. Non-filing of taxes accounted for $28 billion in 2006 and $27 billion in 2001 while underpayment of taxes increased to $46 billion from $33 billion in the earlier study.
Compliance is highest when the IRS has third-party information reporting (1099s) and/or withholdings (pay as you go payroll withholdings). Congress and the IRS will continue to push for additional third-party reporting to help reduce the tax gap and utilize technology, along with increased examinations to reduce the tax gap.
If you have specific questions about IRS tax problems, you can post those questions here or send an email to email@example.com (all communication regarding tax matters is confidential to the fullest extent of the law). To learn more about tax problems and how to resolve them, visit www.irssurvival.com (if you do not see your specific issue listed or you cannot find an answer to your specific problem, call 855-IRS-Survival or 573-275-9055.
IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advise in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.
Taxes, Liens and Levies, Oh My!!
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Alan is a CPA and a Certified Fraud Examiner (CFE) with the firm Begley, Young, Unterreiner & White, LLC located in Cape Girardeau. He is a member of the American Institute of Certified Public Accountants, the Missouri Society of Certified Public Accountants and the Association of Certified Fraud Examiners. Alan obtained his MBA from Southeast Missouri State University, and is also a Certified QuickBooks ProAdvisor who provides support to clients on the use of QuickBooks. Alan's firm works with a variety of small businesses and not-for-profit organizations providing accounting and payroll services, compilations, reviews and audits, estate and tax planning and tax preparation. Alan can be reached at 334-2845 (office) and 275-9055 (cell) or you can email him at firstname.lastname@example.org.