The Internal Revenue Service in a news release (IR-2024-262) on 10 October 2024 announced the tax gap projections for tax year 2022, a detailed analysis showing the nation’s projected gross tax gap of USD 696 billion. This reflects the difference between projected “true” tax liability and the amount of tax that is actually paid on time.
The new tax gap projections reflect an increase over the tax year 2014-2016 estimates and the tax year 2017-2019 projections. The 2022 projection is an increase of USD 200 billion over tax years 2014-2016.
However, the IRS noted the increase for 2022 is similar to the 41% increase in the economy since the 2014-2016 time period as measured by the Gross Domestic Product. With the new study also showing the voluntary compliance rate among taxpayers remaining steady at 85%, the IRS noted the tax gap increase ultimately reflects growth in the economy and changes in the sources of income – not a change in taxpayer behavior involving filing or paying their taxes.
In addition, the new tax gap projections reflect the time period before the IRS began increasing tax compliance work following the passage of the Inflation Reduction Act (IRA) in August of 2022. Since then, the IRS has stepped up compliance activity in a variety of areas with the additional funding, including the agency collecting an initial USD 1.3 billion from high-income taxpayers following IRA funding.
The new projections are published in Tax Gap Projections for Tax Years 2021 and 2022 (IRS Publication 5869).
