What We Pay and What We Owe—IRS Releases New Report on Taxpayer Compliance

paying taxesThe latest report from the IRS shows about the same number of us are paying the taxes we owe, and about the same number are not.

 

The tax gap, or the difference in taxes paid versus those potentially owed (as estimated by the Internal Revenue Service) in the United States is about $381 billion, by latest estimates.  Those billions are monies that would fund a myriad of worthwhile programs and services throughout the country were they paid as per federal tax laws.

 

In September, the IRS released its comparative report that looked at tax revenue in the years 2011 through 2013.  There are five types of taxes reviewed by the IRS.  These taxes include employment taxes, personal income taxes, corporate taxes, excise, and estate taxes.  The bottom line is that the tax gap is roughly the same as it was during tax years 2008 through 2010.  The most recent report estimates that about 83.6 percent of owed taxes are paid on time and voluntarily by US taxpayers.  By comparison, the percentage of taxes paid the same way in the 2008 to 2010 tax period was 83.8 percent—virtually the same. 

 

Notes IRS Commissioner Chuck Rettig, "Voluntary compliance is the bedrock of our tax system, and it's important it is holding steady.  Tax gap estimates help policy makers and the IRS in identifying where noncompliance is most prevalent.  The results also underscore that both solid taxpayer service and effective enforcement are needed for the best possible tax administration."

 

The tax gap is divided three ways:

  • Taxes that are underpaid: These are taxes that are reported, but not paid on time.
  • Taxes that are underreported: These are revenues that are understated on a tax return.
  • Taxes that are not filed: As the name implies, these are taxes that are not paid on time, nor are required tax returns filed on time.

 

Tax gap estimates are an important measure of compliance in the US.  Compared to many countries, the US enjoys a relatively high and stable rate of tax compliance.  While most people are interested in saving on their taxes, or seeing tax rates reduced, tax revenue pays for necessary state and federal services.  Without tax infrastructure, even basic expectations, like passable roads, good education, food safety, affordable utilities, and federal security can quickly go south.

 

Despite the budget squeeze at the IRS, the agency continues to push compliance through its criminal tax investigations, civil and criminal tax audits.  That said, no one needs to pay more tax than legally owed, and there are smart strategies you can use to pay tax obligations, report wealth accurately, and protect individual or corporate wealth from unnecessary taxation.  Talk to a reputable tax attorney to learn the best options for your plans, portfolio, and future.

 

Smart tax advice from experienced tax litigation attorneys in Chicago and Cleveland

If you have an offshore tax question, a corporate payroll tax issue, or seek to optimize tax opportunities to preserve or build your wealth, our tax lawyers can help.  At Robert J. Fedor, Esq., LLC we provide tailored, insightful solutions to tax problems involving private wealth or corporate assets.  Contact us or call 800-579-0997 today.

Contact Us