The projected gross tax gap jumped to $601 billion in tax year 2020 and $688 billion in tax year 2021, the IRS said last week in Publication 5869, adding that the figures do not cover areas such as corporate income tax and noncompliance with pandemic credit rules.
The projections marked the first year that the IRS has issued figures for single tax years rather than for a three-year period. The IRS said it would continue to issue single-year projections in the future.
Growth in the projected gross tax gap from tax year 2020 to tax year 2021 is driven by growth in the projections for nonfiling and underreporting of individual income tax, along with underreporting of the self-employment tax, the IRS said.
Because data is lacking, the projected tax gap does not cover offshore activities; issues involving digital assets or cryptocurrency as well as corporate income tax; income from flowthrough entities; and illegal activities, the IRS said.
The projections also do not cover noncompliance related to pandemic relief credits because there are no estimates for compliance behavior associated with those credits. Learn more.