By the Editors April 21, 2012
The April 17 deadline to file a 2011 tax return has come and gone, but taxpayers probably still owe the government hundreds of billions of dollars.
Each year, a large number of individuals and corporations underreport their tax liability, underpay the bill or simply fail to file a return.
With the federal deficit reaching $1 trillion for the fourth straight year, concern has grown in Washington over the government’s ability to collect tax revenue efficiently and on schedule. To address the problem, the Government Accountability Office conducted a study earlier this year to measure the so-called tax gap and assess what might be done to narrow it.
Among the GAO’s findings:
The tax gap has grown with national income. In tax year 2006, the gap stood at $450 billion, up from about $345 billion in tax year 2001. However, the relative size of the gap has held fairly steady: about 83.1% of what the nation owed in 2006, down only slightly from 83.7% in 2001.
About 40% of the 2006 tax gap came from misreporting non-corporate business income and the self-employment taxes that go along with it. The main culprits are sole proprietors who either underreported how much they made or over-reported their business expenses.
To get more people to file what they owe on time, the GAO recommends requiring more extensive reporting information from third parties like landlords, universities and mortgage lenders; improving the quality of taxpayer service at the Internal Revenue Service; setting aside more money for enforcement; and simplifying the tax code.
Read the full report.
This entry was posted on Saturday, April 21st, 2012 at 10:54 pm. It is filed under Tools & Resources and tagged with deficit, GAO, IRS, tax gap, taxes. You can follow any responses to this entry through the RSS 2.0 feed.
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