Tax Gap? What’s That!?!

Tax gap. No, it’s not a fancy store with all your tax accessory needs. It’s a calculation. Ok, so it’s more complicated than that. Here’s the basics behind what the tax gap is and why it’s important.

So, everyone knows that April 15th is tax day! Where’s the cake? Anyways, the rule goes that every single person in who is claiming United States citizenship is supposed to have their taxes filed by that day. Supposedly. But as we all know, not everyone gets in their taxes by that date and that is part of the basic principle of the tax gap. As far as the government is concerned, they have calculated the amount of money owed to them by us, the tax payer, by that fateful day. Let’s for fun say that this year the government expects the citizens to cough up 1 trillion dollars in tax money on/by April 15th. When they finally count it up though, they only have 7.5 billion dollars paid. The 2.5 billion missing is the tax gap.

The gap measures the degree in which tax payers do not pay the correct tax, do not pay on-time, or do not file all together. They do manage to close some of the gap each year with audits and backfiling, but there is always a large sum of money the poor government goes without each tax season. So, how well do we follow the rules of the tax? Obviously, a lot of us need a time out.