The Blubber

Americans neglected to fulfill their tax obligations by an estimated $688 billion on their 2021 returns, marking a record high, as disclosed by a new IRS estimate. The agency has expressed the urgency of taking measures to enhance compliance, including heightened audits targeting high-income taxpayers, businesses, and partnerships.

This $688 billion estimate is the IRS's initial release of annual data on the tax gap, and the agency has affirmed its commitment to providing this information on a yearly basis. Notably, this figure represents an increase of over $138 billion compared to estimates for the tax years 2017 to 2019.

With increased funding from the Inflation Reduction Act (IRA), the IRS is intensifying audits on wealthy taxpayers, aligning with its directive to address tax evasion by higher earners. The goal is to narrow the tax gap and generate additional revenue for federal initiatives, such as the IRA's $370 billion allocated to green energy investments.

IRS Commissioner Danny Werfel emphasized the significance of reinforcing compliance efforts, characterizing these steps as urgent. The intention is to inject more fairness into the tax system, safeguard taxpayers who fulfill their obligations, and combat the widening tax gap.

It's noteworthy that the IRS has clarified its stance, indicating that audits will not be heightened for households with annual earnings below $400,000.

In 2021, about $77 billion in taxes were unpaid due to nonfiling, the IRS said.