In government parlance, the “tax gap” is the difference between the taxes owed and what’s actually paid on time. In their most recent analysis, from 2001, the Internal Revenue Service estimated that only about 84 percent of federal taxes were voluntarily paid on time that year, leaving a gross tax gap of $345 billion, or roughly 16 percent, uncollected.
It is truly sad that the most current data is over ten years old.
According to current estimates the current “Tax Gap” is $410 billion to $500 billion for 2010. There have been some fun Tax Gap cases in the news in the past few years: Nicholas Cage, Wesley Snipes and Tim Geithner.
The House recently voted to cut the IRS budget by $600 million in fiscal year 2012, as part of the budget reductions legislation. It is estimated by the IRS Commissioner that this will cause tax collections to fall $4 billion dollars.
I have mentioned an issue that I had been made aware of and was told that it was too small to be concerned with; nannies that refuse to be paid in anything other than cash. But they did audit a client of mine that took way too long and ended up with a minor change to their taxes. Some documentation had been lost in a move.