Fraud may be costing the federal government more than $300 billion a year in lost tax revenues, according to a new estimate from the Government Accountability Office.
Reviewing data from 2018 through 2024, GAO determined that annual tax fraud loss is between $116 billion and $304 billion each year. GAO said its analysis is based on IRS fraud cases, potential fraud in the tax gap (the taxes that are owed but not paid), and tax evasion in the informal or shadow economy.
GAO noted that the estimates are inherently uncertain but are based on the best evidence and analytical methods available. And even with uncertainty, the analysis should be useful to lawmakers as they look for ways to reduce cheating.
"The estimate could help Congress and agency officials understand the potential scale and scope of tax fraud loss and decide how to allocate resources for fraud risk management," GAO said. "For example, the estimate could inform decisions about the costs and benefits of implementing new controls to prevent, detect, and respond to tax fraud."
GAO made two specific recommendations. First, the nonpartisan federal agency recommended that the IRS develop and document an anti-fraud strategy. Second, GAO recommended that the IRS designate a dedicated anti-fraud entity.
The IRS "partially agreed" with the recommendations, GAO said. IRS Chief Executive Officer Frank Bisignano disputed the report's definition of fraud, saying GAO was casting too wide a net and including taxpayer noncompliance that falls short of fraud.
Rep. Richard Neal, the senior Democrat on the House Ways and Means Committee, said the report shows how important it is to fund the nation's tax agency - something Democrats tried to do before Republicans pulled back the funding.
"Democrats were right to make overdue investments into IRS staffing and enforcement against wealthy tax cheats," Neal said in a statement. "Trump's deliberate sabotage of the IRS is making this problem worse, sending audits plunging and opening the door for more fraud. While his billionaire friends continue taking advantage of the tax code, the American people are getting ripped off by a system that's rigged against them."