A new report from the Government Accountability Office (GAO) suggests that a small reduction in the tax gap could produce major fiscal benefits for the federal government.
The study examined the impact of efforts to reduce the federal tax gap. Individual and business taxpayers collectively pay about 85% of the total taxes they owe, and the IRS estimates the difference between what taxpayers owe and what they pay on time is $496 billion per year for tax years 2014-2016, according to the IRS.
To reduce the gap, the GAO report recommends the IRS implements a way to digitize tax returns so its tax enforcement programs can better identify taxpayers who aren’t complying with the tax laws, including those who underreport their income. See the report.