This record shortfall is primarily due to underreported income and non-filing of tax returns, and the IRS plans to intensify audits and enforcement measures to close this gap.
Individual taxpayers and businesses are primarily responsible for unpaid taxes, with undeclared business and farm income forming the largest segment of noncompliance. The IRS is preparing additional income reports from gig workers and small business owners with the implementation of new income reporting rules through payment apps in 2023.
The IRS acknowledges that their estimates don’t capture all forms of tax evasion, including using cryptocurrency, offshore accounts, and flowthrough entities.
