America's Law Breakers

 The head of the IRS calculated that tax evasion in the U.S.A. may total $1 trillion a year.

Internal Revenue Service Commissioner Chuck Rettig told a Senate panel Tuesday that previous tallies of the tax gap — which came to a cumulative amount of about $441 billion for the three years through 2013 — didn’t include some tax evasion-techniques that weren’t on their radar at the time. New estimates include the use of cryptocurrency, he said. Offshore tax evasion, illegal income that goes undetected by the IRS and underreporting from pass-through businesses also contribute to a larger than previously known tax gap, Rettig said.

“I think it would not be outlandish to believe that the actual tax gap could approach and possibly exceed $1 trillion per year,” Rettig told the Senate Finance Committee.

Most individuals earn their income through wages, where taxes are automatically deducted from each paycheck. However, income from pass-through entities, such as partnerships and limited liability corporations isn’t subject to automatic withholding, giving the owners more opportunity to skirt tax obligations.

A study released last month, which included two IRS officials as authors, found that the richest 1% of Americans don’t report about 20% of their income to the government. Those individuals are able to use pass-through businesses and offshore structures to shield their income from the IRS’s view, the study said. Collecting that money would boost tax collections by $175 billion a year, the study found.

Pay up: US tax dodgers are costing US $1 trillion, IRS says | Tax News | Al Jazeera