Government, Taxes 

2001 Tax Shortfall was $345 Billion

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Taxpayers underpaid their taxes by $345 billion dollars in 2001 of which $55 billion has been recovered. The majority of that underpayment is the result of underreporting of income with a bit from non-filing and underpayment. “Underreported business income accounted for $109 billion of the total $197 billion in underreported individual income tax, the majority of it coming from non-farm sole proprietors of small businesses. They file income on Schedule C, where there is little or no third-party reporting or withholding.”

$197 billion in underpaid taxes came from individual income tax which would logically mean $148 billion in business income tax was dodged as well. I am curious to know how much of the remaining $290 billion they’ll have recovered by 2008, when they can no longer audit people (individual) for 2001 returns.

Incidentally, the budget deficit in 2005 was $323 billion dollars. Pay your taxes people.

via CNN Money.

{ 8 comments, please add your thoughts now! }

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8 Responses to “2001 Tax Shortfall was $345 Billion”

  1. Anon says:

    How exactly do they know how much income was underreported? They don’t, of course; they are just making it up. And we are supposed to feel bad?

  2. jim says:

    1099 and W2 information is sent to the government and to you. Also, even if you’re not 1099’d (you made less than $600), that money is still deducted from that company’s income as an expense so any disparity there is obvious too.

    If they summed up all the money companies paid out in salaries/commissions/etc. and then how much income was reported, do the math, then they can come up with a rough estimate of how much is underreported.

  3. jim says:

    Plus, the government isn’t your enemy in this case, the people who didn’t pay their taxes are. The governemnt will keep spending and spending and your kids will be the ones who end up paying for the debt. They don’t want you to feel bad for the government, they don’t care what you feel, they just want you to know that tax cheats are stealing from you and yours.

  4. Anon says:

    It seems unlikely that they are not able to collect something as obvious at W-2 data. Indeed, according to this chart:\_gap\_figures.pdf

    “Wages, salaries, and tips” makes up only $10B of the $345B gap. The largest number in that chart is “Nonfarm proprietor income”, which sounds like something that might have a high fudge factor.

    In fact, the data itself is based on a sample of only 46,000 returns, which were fully audited. While I am a firm believer in statistical analysis, I also believe it is somewhat dishonest for CNN to report the gap as both an estimate and reality.

  5. jim says:

    I was under the impression that the IRS reported those numbers.

  6. Mikey says:

    It seems like mostly business income was underreported, not suprisingly, although I would think its quite hard to come up with how much iwasn’t collected.

  7. CK says:

    What about the millions of deductions people miss every year? The tax code makes it very easy to overpay, you have to essentially search for deductions (and credits) you are entitled to. As far as taxes go I enjoy reading the blog I’m not affliated in anyway just passing along a suggestion like I would with a good book.

  8. jim says:

    CK – Very true, a lot of people miss deductions because they simply don’t know. I wonder how many people itemize when they should use standard deductions and vice versa.

    I’ve read before and it’s very good, I recommend it too for everyone.

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