In the IRS IR-2024-262, the IRS estimated that there is a tax gap of around $696 billion for 2022.

Even if the IRS mentioned in their communication that 85% of taxpayers are compliant, the 15% remaining is broken down in the following three areas (extracted directly from IRS communications):

  • “… Non-filing, which means tax not paid on time by those who do not file on time:
    • $63 billion in tax year 2022, representing 9% of the gross tax gap.
  • Underreporting, which reflects tax understated on timely filed returns.
    • $539 billion in tax year 2022, representing 77% of the gross tax gap.
  • Underpayment, or tax that was reported on time, but not paid on time.
    •  $94 billion in tax year 2022, representing 14% of the gross tax gap.”

The IRS communication credits to the Inflation Reduction Act initiatives the recovery of $1.3 billion from high-income, high-wealth individuals. This seems like a drop on the bucket, but the IRS indicates in the document how they are projecting to recover $90 billion from tax years 2021 and 2022 through late payments and enforcement.

We will keep you informed about IRS initiatives and results of these programs. Remember the old saying “Better safe than sorry”.

Link IRS – IRS releases 2022 tax gap projections; voluntary compliance rate among taxpayers remains steady

Link IRS – Tax Gap Projections Methodology