Report: IRS Tax Gap projections could be more on the mark

Part of that challenge, the report says, comes from trying to measure the so-called “informal economy,” which can include activities like home repair. Selling illegal drugs, for instance, should not be taken into account when estimating the gap, the report says.

{mosads}But the inspector general added that it could be a fine line between legitimate informal activities like selling items online, and criminal activity like unloading counterfeit goods.

The report also says that it’s becoming harder to project how tax evasion is affecting the Tax Gap, given the number of offshore tactics available.

And it says that the IRS should reassess how it projects the corporate side of the gap. The agency currently uses figures for how much a corporation’s recommended tax bill, but companies often contest those charges.

The IRS at least substantially agreed with the report’s recommendations, which include studying whether more interim updates were possible and figuring out how to better project for the informal economy and tax evasion.

“The IRS agrees that some steps may be taken that would improve the quality of Tax Gap estimates and provide additional insights to policymakers,” the agency’s Rosemary Marcuss wrote in response to the report.