An IRS report found that Americans tend to pay less taxes than they owe.
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By Kerry Close
April 28, 2016

If you paid all the taxes you owed this year, congratulations: That fact means you’ve likely given the government more of its due than most of your fellow taxpayers.

The Internal Revenue Service estimated Thursday that Americans pay an average of 82% of the taxes they owe, the Wall Street Journal reported. That’s a a decline from previous estimates: In 2006, the IRS found that Americans paid about 83.1% of the axes they owed.

That non-compliance creates a tax gap, which represents the difference between taxes owed and taxes collected. The tax gap was about $458 billion a year and $406 billion after IRS enforcement. To put that figure in perspective, it would cover more than 10% of federal spending between 2008 and 2010, the years covered by the study.

Still, experts point out that it would be unrealistic to suppose that the government could collect all the money it’s owed. They also point out that, due to methodology changes in the study since it was last conducted, the decline doesn’t indicate an actual change in taxpayer behavior.

The report also found that when the IRS doesn’t have a way to verify income, taxpayers tend to underreport it far more frequently. Income from sources like small business profits have a 63% misreporting rate, compared to a rate of just 1% for wages from W-2 forms from employers.

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