Between $116 billion and $304 billion. That is how much the Government Accountability Office thinks tax fraud cost the federal government each year from 2018 through 2024.
The top of that range is more than $300 billion a year in lost revenue. GAO built it from three pieces: IRS fraud cases, potential fraud inside the tax gap (taxes owed but not paid), and tax evasion in the informal or shadow economy.
The figure that matters comes with a warning label. GAO called the estimates inherently uncertain, though it said they rest on the best evidence and methods available. Even so, it argued, they should help lawmakers hunting for ways to cut 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. It added that the number could inform decisions on the costs and benefits of new controls to prevent, detect and respond to fraud.
Two recommendations, a partial yes
The nonpartisan agency made two recommendations to the IRS. Develop and document an anti-fraud strategy. And designate a dedicated anti-fraud entity.
The IRS “partially agreed,” GAO said. IRS Chief Executive Officer Frank Bisignano pushed back on the report’s definition of fraud, saying GAO cast too wide a net and swept in taxpayer noncompliance that falls short of fraud.
The political fight
Rep. Richard Neal, the senior Democrat on the House Ways and Means Committee, read the report as an argument for funding the tax agency. Democrats tried to do that, he said, before Republicans pulled back the money. “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.”
