IRS study: gap in tax collections exceeds $300 billion per year.

• Position: Internal Revenue Services

The preliminary results of an Internal Revenue Services study of compliance with the tax laws show that the gross tax gap--the difference between what taxpayers should pay and what they actually pay on a timely basis--exceeds $300 billion per year. IRS enforcement activities, coupled with late payments, recover about $55 billion of the tax gap, leaving a net tax gap of between $257 billion and $298 billion.

"This research confirms that the vast majority of Americans pay their taxes honestly and accurately," IRS Commissioner Mark W. Everson said. "Even after IRS enforcement efforts and late payments, the government is being shortchanged by over a quarter-trillion dollars by those who pay less than their fair share. People who aren't paying their taxes shift the burden to the rest of us."

Since 2001, the year covered by the study, the agency has taken a number of steps to bolster enforcement. The IRS increased its enforcement revenues by nearly 28 percent from $33.8 billion in 2001 to $43.1 billion in 2004. Audits of high-income taxpayers--those earning $100,000 or more--topped 195,000 in fiscal year 2004, which is more than double those conducted in 2001. Total audits of all taxpayers topped 1 million last year--a 37 percent jump from 2001.

The initial tax gap findings come from a three-year study called the National Research Program (NRP), which audited 46,000 individual income tax returns for 2001. The preliminary results determined a range for the tax gap, which will be refined into final, more detailed estimates by the end of this year. It is unlikely but possible that the final estimates of the total tax gap will fall outside the established range.

The new study shows modest deterioration in tax compliance among individual...