IRS Publication 5786 – The IRS releases detailed analyses of the tax gap — the difference between taxes owed and taxes paid voluntarily and on time — to guide compliance strategies and public understanding. IRS Publication 5786, titled The Net Tax Gap for Tax Years 2014-2016, focuses specifically on the net tax gap. Published in October 2022 (and posted on IRS.gov in March 2023), it explains how much of the unpaid tax liability is eventually recovered through enforcement actions and voluntary late payments.
This technical paper complements the broader Federal Tax Compliance Research: Tax Gap Estimates for Tax Years 2014-2016 (Publication 1415). It remains a trusted reference for understanding historical noncompliance patterns, even as newer projections (such as for tax year 2022) show growth due to economic expansion.
What Is the Tax Gap? Gross vs. Net Explained?
The gross tax gap measures the true tax liability not paid voluntarily and timely. It breaks into three components:
- Nonfiling gap — Taxes owed by those who do not file returns on time.
- Underreporting gap — Taxes understated on filed returns (the largest share).
- Underpayment gap — Taxes reported but not paid on time.
The net tax gap subtracts enforced collections (from audits, liens, levies) and other late voluntary payments (e.g., amended returns) from the gross figure. It represents the portion of the tax gap that the IRS ultimately never collects.
Key definitions from IRS sources:
- Voluntary Compliance Rate (VCR): Percentage of true tax liability paid voluntarily and on time.
- Net Compliance Rate (NCR): Percentage eventually paid after enforcement and late payments.
Key Findings in IRS Publication 5786 (Tax Years 2014-2016)
According to the official estimates:
- Average annual gross tax gap: $496 billion.
- Enforced and other late payments: Approximately $68 billion per year (projected collections over time).
- Average annual net tax gap: $428 billion.
This means about 13.7% of the gross tax gap ($68B / $496B) was eventually recovered, leaving 86.3% uncollected.
Voluntary Compliance Rate: 85.0%
Net Compliance Rate: 87.0%
Total true tax liability: $3,307 billion annually on average.
Publication 5786 provides detailed projections of late payments by tax type (in billions of dollars, average annual for 2014-2016):
| Tax Type | Projected Late/Enforced Payments (Avg. Annual) |
|---|---|
| Individual Income Tax | ~$50.5 billion |
| Corporation Income Tax | ~$7.5 billion |
| Employment Tax | ~$5.1 billion |
| Estate & Gift Taxes | ~$2.6 billion |
| Estate and Trust Income Tax | ~$1.2 billion |
| Unemployment Tax | ~$0.2 billion |
| Excise Taxes | ~$0.2 billion |
| Railroad Retirement Tax | Negligible |
| Total | ~$67.7–68 billion |
Individual income tax accounts for the majority of recoverable amounts, while employment taxes prove hardest to collect fully (often due to business bankruptcies or small-scale noncompliance).
How IRS Publication 5786 Calculates the Net Tax Gap?
The publication details a rigorous, data-driven methodology:
- Uses IRS Master File data for most tax types, tabulating payments by tax year of liability and fiscal year of payment.
- Projects the “tail” of future collections (often 10–25 years after the tax year) based on historical patterns from FY 2008–2020.
- For corporation income tax, relies on the Enforcement Revenue Information System (ERIS).
- Accounts for statute of limitations and records dropped after three years of inactivity.
- Distinguishes tax principal from interest/penalties (only tax payments reduce the gap).
Limitations noted include incomplete early-year data and assumptions about future payment behavior. The report shows collection percentages have been relatively stable (11–14% of gross gap recovered) but vary significantly by tax type — estate taxes recover ~60%, while employment taxes recover only ~6%.
Full Picture: Components of the 2014-2016 Gross Tax Gap (from Publication 1415)
- Underreporting: $398 billion (80% of gross gap) — mostly business income, credits, and self-employment taxes.
- Underpayment: $59 billion (12%).
- Nonfiling: $39 billion (8%) — primarily individual income and self-employment taxes.
Individual income tax dominates the overall gap, followed by employment and corporate taxes.
Why These Numbers Matter and Comparison to Newer Data?
The $428 billion net tax gap for 2014-2016 reflected strong economic growth (true tax liability rose >23% from the prior triennial period). IRS enforcement and late payments closed part of the gap, but most noncompliance stems from underreporting on filed returns rather than outright nonfiling.
For context, IRS projections have since grown:
- Tax Year 2022 gross tax gap: $696 billion (Publication 5869).
- Projected net tax gap for recent years: Around $606–617 billion after enforcement/late payments.
- Voluntary compliance rate remains steady at ~85%.
These figures underscore why the IRS invests in modern enforcement tools, information reporting, and taxpayer services — efforts that directly reduce the net tax gap over time.
Download IRS Publication 5786 and Related Resources
- Direct PDF: IRS Publication 5786 (The Net Tax Gap for Tax Years 2014-2016)
- Main overview: IRS Tax Gap Estimates (Publication 1415)
- Latest projections: IRS Statistics – The Tax Gap
FAQ About IRS Publication 5786 and the Net Tax Gap
What does Publication 5786 specifically cover?
It focuses exclusively on estimating enforced collections and voluntary late payments to convert the gross tax gap into the net (unrecoverable) amount.
Is the tax gap getting larger?
In absolute dollars yes, due to economic growth and inflation, but the voluntary compliance rate has remained stable around 85%.
How does the IRS use these estimates?
To prioritize audit selection, design compliance programs, request funding from Congress, and measure program effectiveness.
Does the net tax gap include interest and penalties?
No — only the underlying tax principal. Interest and penalties are separate and do not reduce the reported tax gap.
Where can I find the most current tax gap data?
Check the IRS Tax Gap page regularly; new projections and estimates are released every few years.
Final Thoughts
IRS Publication 5786 provides essential transparency into how much of America’s tax liability ultimately goes uncollected — and how enforcement efforts recover a meaningful portion. For tax years 2014-2016, the $428 billion average annual net tax gap highlights both the scale of noncompliance and the IRS’s ongoing role in closing it.
Understanding these figures helps taxpayers appreciate the importance of accurate filing and timely payment while informing policymakers about resource needs for fair tax administration. For the latest official data, always refer directly to IRS.gov.
All statistics sourced directly from IRS Publications 5786, 1415, and the official IRS Tax Gap statistics page (last reviewed 2025–2026 updates). Estimates are averages for the three-year period and subject to the methodologies described in the publications.