The States' Stake and Role in Closing the Federal "Tax Gap"‪.‬

For the calendar year 2001, the most recent year for which tax data were analyzed for this purpose, the Internal Revenue Service (Service) estimated that the gross "tax gap" was $345 billion. (1) The tax gap is defined as the difference between the aggregate amount that taxpayers pay voluntarily and on time and what they should pay under the law. (2) A taxpayer contributes to the tax gap when he underreports his tax liabilities on a tax return, underpays taxes due from a filed return, or fails to file a required tax return altogether or on time. (3) The tax gap is premised on legal activity only (4) and does not include the "underground economy." (5) Members of Congress recognize that a federal tax gap exists. (6) There is also general consensus that Congress and the Service should seek to address this problem. (7)