IRS' failure to collect from tax cheats could cost you $3,000 a year
The average U.S. household is paying an annual surtax of more than $3,000 to subsidize taxpayers who aren’t paying all they owe, a new report from the Taxpayer Advocate Service found.
Reduced funding for the Internal Revenue Service has led to lower staffing levels and fewer audits, which has reduced the amount the IRS has been able to collect from taxpayers voluntarily or through enforcement, the Taxpayer Advocate, an independent branch of the IRS, said in its annual report to Congress on Wednesday.
The IRS recently estimated the tax gap – the difference between what the federal government is owed and actually collects – averaged about $381 billion in unpaid tax from 2011-2013. That equates to roughly 14.2% of taxes never being submitted to the agency.
With approximately 122 million U.S. households in 2013, that adds up to each U.S. household effectively paying an average annual “surtax” of more than $3,000 to cover others who don’t pay their full tax bill. The report, which included suggestions for legislation, said this calculation was based on the assumption that the government is seeking to collect a fixed amount of revenue, leaving compliant taxpayers to pay more to subsidize noncompliance by others.
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