The IRS is ramping up audits and enforcement against rich households and corporations after a funding boost.
America’s unpaid tax bill keeps growing and is now surpassing half a trillion dollars each year, according to new estimates from the Internal Revenue Service.
Thursday’s numbers add new fuel to ongoing debates about unpaid taxes, who’s not paying taxes, and how the IRS can recoup the money. The tax gap is not a measure of illegal activity. It doesn’t capture criminal tax evasion. The gap is an estimate of the difference between the amount the agency actually collects in taxes and the amount the IRS could collect if taxpayers fully reported all of their taxable income and the agency fully taxed it.
On Wednesday, Microsoft MSFT, -0.94% put out a Securities and Exchange Commission filing about a notice it received from the IRS. The tax agency said Microsoft allegedly owed $28.9 billion in back taxes, plus interest and fines for tax years 2004 through 2013. Microsoft said it will “vigorously contest” the IRS claim.
The latest numbers are based on models and past data that pre-date the wider spread of cryptocurrency into the economy so it’s difficult to measure the full impact of non-compliance from crypto holders, IRS officials noted. The IRS can only tax the income that it knows about, the agency says. Wages, salary and tips are subject to withholdings and plenty of documentation that the IRS can easily see. This source of income accounted for 1% of the estimated tax gap in 2021, the IRS said.
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