What is the U.S. Tax Gap?

Tax gap, it's a word frequently used in the media when politicians and economic analysts are discussing U.S. budget and income issues, but what is it exactly? It's actually a very simple concept that encompasses over 2-Trillion Dollars of tax revenue created by the U.S. economy in over 27 areas. In fact, the numbers encompassing this simple concept are so massive, the IRS only performs a Tax-Gap Study once every several years. The most recently released study was done in 2006 and 2001 was the prior study released to that. So what is this simple concept that seems to be so very difficult to calculate? In short, it's the total revenue from tax generated, minus the amount not collected. Yes, that's a very simple A - B = C equation. The difficulty in amassing and reporting all of this information is the amount of information actually contained in parts 'A' and 'B' of that simple equation. So what was the tax gap in 2006? $385 Billion dollars.Yes, that's right. The amount of uncollected revenue for the United States Treasury is approximately the size of the entire Gross Domestic Product (GDP) of  the United Arab Emirates (UAE.) That's a staggering amount of money and for most, those numbers are entirely too large to even comprehend. So whats does this mean? Does it mean if you don't file your return and pay your taxes you'll be lost in the myriad of $385 Billion Dollars? Don't count on it. The IRS not only pursues non-compliant taxpayers, but in Fiscal Year 2013 had an incarceration rate of 85% of those it investigated for criminal tax evasion and non-compliance. Your best bet is to file accurate tax returns and pay off any outstanding tax as soon as possible. The good news is that if you need assistance in paying a tax bill, the IRS and State taxing authorities allow for installment agreements to split up your tax debt over time.

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Love and Associates, Inc is a tax resolution, tax preparation and tax planning company located in San Diego, CA with clients all over the world. They offer support for small to medium size businesses as well as solutions for those with tax problems and tax burdens.