IRS Reports: Gap in U.S. Taxes Owed vs. Paid Continues to Grow

by | Dec 11, 2023 | IRS

The Internal Revenue Service (IRS) has recently unveiled some alarming statistics that have far-reaching implications for both tax compliance and government revenue. In 2021, the IRS estimated a colossal $688 billion gap between the taxes owed and the actual IRS debt collection. This marks a staggering 72% increase since 2014 and shines a spotlight on the growing challenge of tax collection and its impact on government funding. As taxpayers and businesses grapple with the complexities of the tax system, professional guidance from COTTS LAW becomes increasingly invaluable in navigating the intricacies of tax debt and compliance.


What’s Driving the Gap?

The factors contributing to this widening chasm between owed and paid taxes are multifaceted:

  1. Underreporting of Income: The most significant contributor to this gap, amounting to an estimated $542 billion in 2021, is individuals and businesses failing to report their total income. This can happen through various means, including concealing income in offshore accounts, making false deductions, or simply neglecting to report all income sources.
  2. Non-Filing: An estimated $77 billion in taxes remains uncollected because individuals and businesses choose to refrain from filing tax returns altogether, a situation where overdue tax help can be critical.
  3. Underpayments: Underpayments, often unintentional due to miscalculations or errors, account for a portion of the gap as individuals and businesses pay less than what they actually owe.


Impact and Consequences

The repercussions of the IRS’s dwindling ability to collect owed taxes reverberate throughout the economy. The uncollected revenue translates into reduced funding for essential government services, including infrastructure, education, and healthcare. Moreover, it creates an unfair competitive landscape, disadvantageous to businesses that diligently comply with tax laws when compared to those that underpay or evade taxes entirely.


What Can Be Done?

Addressing this widening gap necessitates a comprehensive strategy:

  1. Increased IRS Funding: Providing the IRS with more resources is vital to enhancing its enforcement and audit capabilities. This includes recruiting additional personnel, investing in technology, and delivering training to improve efficiency and effectiveness.
  2. Simplifying the Tax Code: The complexity of the current tax code poses a significant challenge for both individuals and businesses, making it difficult to comply and leading to unintentional underpayments. Streamlining the tax system can help taxpayers better understand their obligations, thereby reducing errors and the need for overdue tax help.
  3. Cracking Down on Tax Evasion: Stronger enforcement measures, including heightened penalties and advanced data analysis techniques, are critical in deterring tax evasion. These measures ensure fair compliance among all taxpayers, reducing the tax gap and promoting equity. Enhanced taxpayer services and accessibility to the IRS federal tax number can also play a significant role in this effort.


Navigating Tax Debt with COTTS LAW

If you’re grappling with tax debt or facing tax compliance issues, you don’t have to confront these challenges alone. COTTS LAW is committed to helping individuals and businesses navigate the complexities of IRS matters and find solutions to resolve outstanding debts.

Our expertise encompasses:

  • Tax Debt Relief Options: Exploring available avenues like installment plans, offers in compromise, and penalty abatement to alleviate your tax burden.
  • Representation During IRS Audits: We stand as your advocates before the IRS, safeguarding your rights and striving for a favorable outcome.
  • Tax Planning and Compliance: Crafting strategies to minimize future tax liabilities and prevent potential IRS issues.
  • Don’t let IRS seize your assets. Cotts Law Firm can help protect your property and finances.

If you are facing levies and garnishments from the IRS, Cotts Law Firm can help you.

Bridging the Tax Gap for a Stronger Economy

In addressing the pressing issue of the widening tax gap, it’s evident that a multifaceted approach is crucial. By bolstering IRS debt collection efforts, simplifying the tax code, and cracking down on tax evasion, we can take significant strides toward bridging this gap. These actions not only ensure a fairer tax system but also secure essential funding for public services that benefit all citizens.

The journey to minimize the tax gap is a collective responsibility. It involves government action, taxpayer awareness, and the expertise of professionals in the field. Together, these efforts can lead to a more equitable tax system and a healthier economy, benefiting everyone in the long run.

Take the first step towards resolving your tax challenges with COTTS LAW. Embrace the opportunity for a more secure financial future and contribute to a fairer, more effective tax system.

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About Daniel T.A. Cotts

Daniel is a skilled Tax Attorney who moved to Corpus Christi in 2019 to expand his practice and return to Texas. With over 26 years of experience in the legal profession, Daniel brings a wealth of knowledge of Taxation, IRS Dispute representation & resolution, Estate Planning, Accounting, and Business & Contract Law to South Texas.


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