According to Law360, the gap between taxes owed each year and those actually paid could be more than $1 trillion, much larger than the most recent estimate of $441 billion, IRS Commissioner Chuck Rettig told the Senate Finance Committee on Tuesday.
IRS Commissioner Chuck Rettig told the Senate Finance Committee on April 13, 2021 that his agency is making the most of its resources, but "we do get outgunned."
The Ballooning Of The Tax Gap, Rettig Said, Can Be Partly Attributed To The Growth In Popularity Of Cryptocurrency, Which Was Still A Relative Novelty The Last Time The Internal Revenue Service Released An Official Estimate Of The Tax Gap, Which Covered Tax Years 2011 Through 2013.
There are now more than 8,600 virtual currencies with a global market capitalization of about $2 trillion, he said. Rettig added that the estimates for 2011 through 2013 didn't have information about foreign-sourced and illegally sourced income.
"I Think It Would Not Be Outlandish To Believe That
The Actual Tax Gap Could Approach And Possibly Exceed
$1 Trillion Per Year," Rettig Said.
The $441 billion tax gap estimate, according to the IRS, is an average gross yearly estimated tax gap based on data from tax years 2011 through 2013. After late payments and enforcement work are factored in, the estimated net tax gap is $381 billion, according to the agency's website.
Rettig also noted that a recently released report found that the top 1% of all earners fail to report about 20% of their income and that some outside estimates have said the tax gap could exceed $7.5 trillion over the next decade.
The IRS will issue a new estimate next year, Rettig said. Meaningfully reducing the tax gap will take a multifaceted effort, he said.
Rettig said the agency has lost about 17,000 employees in the enforcement area over the last decade. It has about 6,500 frontline revenue agents who now handle the most complex individual and corporate tax matters and substantially all of them are dedicated to the most egregious cases, wealthy individuals or the largest corporations, he said. The IRS is using its resources to the best of its ability, he said, but it needs more.
"We do get outgunned. I mean there's no other way to say it," he said. "We are today able to identify evidence of tax fraud and signatures of tax fraud, if you will, and tax evasion that even two years ago we could not identify. But it's an example of we're heading in the right direction. We need to get there ahead of time."
President Joe Biden's Fiscal 2022 Budget Request Calls For A 10.4% Funding Increase For The IRS.
The request would include an increase of $417 million in funding to improve tax compliance and revenue collection under a multiyear project.
Read more at: Tax Times blog