What is the $688 Billion Tax Gap?
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Length: approx. 1 min. 45 sec.
The IRS has revealed predicted numbers for the 2021 tax gap, but what does "tax gap" mean? The tax gap is a calculated estimate of the difference between the overall “true” tax liability and what has actually been paid on time by American taxpayers. Consequently, it encompasses three areas of noncompliance: failing to file, failing to pay, and underpayment.
Though compliance predictions of about 85% remain in line with past projections, the tax gap has risen by $138 billion from the period of 2017-2019. The IRS says that this stark difference can be attributed to economic growth. However the tax gap largely fails to account for offshore activities, digital assets, and pandemic credits, so the full “true” tax liability may not be entirely accurate. Regardless, the IRS has ramped up its efforts to hold all taxpayers accountable with its increased budget from the Inflation Reduction Act, so extra care should be taken to ensure your tax return is filed accurately and paid promptly.
Compliance is consistently reported as higher when taxpayers have third-parties to report their income. When you have a professional tax preparer assisting you in the tax filing process, you are much more likely to file on time, pay on time, and stay out of trouble with the IRS. With this being the case, we highly recommend contacting a tax professional if you do not have one. At XQ CPA, we pride ourselves on reducing your tax liability to its lowest possible amount–legally, giving you peace of mind and more money in your wallet. Reach out to us by calling or making an appointment on our website to schedule your tax planning consultation.
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