There's a new buzz phrase in Congress that has legislators salivating at its revenue potential. What is it and what does it mean to the average citizen? It's called the Tax Gap and because Congress is very interested in it so is the IRS. So just what is the Tax Gap and why is it so important to the very people that pass laws that have a tendency to separate us from our hard-earned money?
According to Congress the Tax Gap is an estimate of the difference between the taxes individual, corporate, employment, estate, and excise that the IRS believes should have been paid on time voluntarily, and what was actually paid for a specific year. In other words, the Tax Gap is the difference between the tax that taxpayers should pay and what they actually pay on a timely basis.
So what? Well, the Tax Gap in 2001 has been valued at 345 billion dollars. Yes - billions of dollars, and that's just for 2001! Expectations are that the amount is significantly higher for subsequent years and because it's such a large amount of money and Congress is convinced it should have been paid in the first place, legislators are eager to get their hands on it.
There are daily news reports of looming deficits due to all the economic strains on the economy, and the pending explosion of Medicare and Social Security benefit payments for aging boomers in the coming years. Given this, Congress and states are looking to raise funds wherever and however they can without raising the income tax rates of people whose votes they need to stay in office. The premise of the Tax Gap is that since it is money that should have been collected in the first place it does not amount to a tax increase and therefore is not a political issue.
So just who is contributing to the Tax Gap and are you one of them?
A 2004 study by the IRS National Research Program (NRP) for Congress identified three primary sources of the Tax Gap that include non-filing, underreporting and underpayment.
Non-filers are individuals or businesses where the IRS has information reported from other sources that indicate money has been paid to these groups but they have failed to file a tax return for whatever reason. It's possible that a refund would have been calculated but without a tax return actually filed the IRS computers calculate the tax based on incomplete information in their systems. Moreover, if a taxpayer waits more than three years to file a tax return any credits that the taxpayer was entitled to will expire. The taxpayer is still
Below are the top articles rated and ranked by Helium members on:
by Teresa Stone
There's a new buzz phrase in Congress that has legislators salivating at its revenue potential. What is it and what does
Add your voice
Know something about Understanding the Tax Gap and what it means to you?
We want to hear your view.
Write now!
Featured Partner
E Square has partnered with Helium, giving you the chance to write for a cause. Browse E Square's featured title...more
hide