IRS chief estimates $1 trillion in federal taxes go uncollected each year

IRS Commissioner Charles Rettig
(Image credit: Toni L. Sandys-Pool/Getty Images)

IRS Commissioner Charles Rettig told the Senate Finance Committee on Tuesday that the gap between federal taxes owed and paid "could approach and possibly exceed $1 trillion per year," more than double the official estimate of $441 billion. IRS research shows that $175 billion of those underpayments come from the wealthiest Americans, Rettig said, and other factors include the rise in untaxed cryptocurrencies, income from foreign sources, and illegal income.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) called the $1 trillion tax gap "a jaw-dropping figure" and asked Rettig how the IRS could fix that. Rettig suggested better reporting of income from third parties, more electronic tax return filing, more regulation of tax return preparers, and a larger enforcement budget. After years of budget cuts, the IRS is "outgunned" by tax cheats and dodgers, he said, endorsing a proposal to take agency funding out of the discretionary stream subject to congressional whimsy and politics. President Biden has proposed raising the IRS budget by 10.4 percent, mostly to boost enforcement.

Rettig also said that while it will be a challenge and require extra hiring, the IRS expects to be ready to start making monthly payments of $250 to $300 per child by July 1, as set out in Biden's $1.9 trillion COVID-19 relief law. The IRS is "not historically" a benefits agency, he said, but it "will be working hard to deliver this program quickly and efficiently." The IRS was also responsible for sending out three rounds of COVID-19 stimulus checks over the past year.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Continue reading for free

We hope you're enjoying The Week's refreshingly open-minded journalism.

Subscribed to The Week? Register your account with the same email as your subscription.