In recent IRS revelations, the tax gap projections for 2020 and 2021 have unveiled some eye-opening statistics. The projected gross tax gap for 2021 has surged to a staggering $688 billion. But what does this mean for you?
The tax gap has widened significantly, emphasizing the need for heightened IRS compliance efforts. This increase underscores the urgency of addressing compliance issues in areas such as high-income individuals, partnerships, and corporations.
Where's the Gap?
The $688 billion gap results from discrepancies between estimated tax liability and timely payments. It encompasses nonfiling, underreporting, and underpayment. IRS enforcement efforts and late payments aim to recover $63 billion in 2021, reducing the net tax gap to $625 billion.
The Bright Side
Despite the challenges, voluntary compliance remains stable, with about 85% of taxes paid on time. With IRS compliance efforts factored in, the projected share of taxes eventually paid is 86.3% for 2021, down slightly from 87.0% for 2014-2016. This drop is attributed to changes in income types and reporting, not compliance behavior.
What It Means for You
Understanding the IRS tax gap is a complex issue, but it underscores the importance of working with experts who can help you navigate the ever-changing tax landscape. Ensuring compliance and optimizing your financial strategies is crucial.
Don't let the tax gap deter you. In the face of the complex tax landscape, it becomes evident that seeking professional assistance is crucial. This is where RP Financial Services comes into play. Let us guide you through the complexities and help you make informed financial decisions.