The Internal Revenue Service made minimal progress closing the “tax gap”—the difference between taxes owed and the amount paid—according to a new report released Thursday by the National Taxpayers Union Foundation (NTUF).
The Internal Revenue Service (IRS) received an overall C minus on the second installment of Grading the IRS report from NTUF, evaluating whether the IRS met goals set by the 2022 Inflation Reduction Act (IRA).
The IRS also received a C for “disrupting scams” and D on “ensuring individuals and businesses using complex arrangements pay taxes owed.”
“Truly transformative efforts to close the tax gap will require better methods to estimate and identify the unknown element of the tax gap. In light of this, we have recommended that the IRS make critical improvements to its data collection, analysis, and transparency,” according to the report, written by NTUF Policy Manager Debbie Jennings.
The NTUF report is in response to a report released by the IRS evaluating its IRA initiatives, in which it gave itself a glowing review. Absent from the IRS’s self-evaluation were actual grades based on performance. NTUF is providing that missing grade scale.
The IRS highlighted over $1 billion that has been collected from high-wealth taxpayers who are known to owe taxes or have failed to file returns in recent years. This figure is well below what the IRS was projected to reclaim when the IRA was passed. The Congressional Budget Office had estimated that the IRS would collect a total of $200 billion over ten years due to its increase in funding, with nearly $4 billion and $7 billion being collected in fiscal years 2023 and 2024 respectively.
Furthermore, since the IRS was already aware of the potential tax due in these instances, the gains seem to be low-hanging fruit. Unlike the taxes collected from known high-wealth non filers, much of the tax gap is unknown and merely estimated through analyzing past data.
Read the report card.