The Internal Revenue Service (IRS) has delayed the release of its annual estimate on the tax gap—the estimated amount of unpaid taxes owed under current law—raising concerns about transparency amid significant changes in agency staffing and enforcement strategies. The delayed report, covering the 2023 tax year, was originally scheduled for publication last fall but has yet to be released.

Historically, the IRS has provided periodic estimates of the tax gap to highlight the difference between taxes owed and taxes actually collected. The agency began issuing these estimates annually during the Biden administration, after years of less frequent updates. However, no new estimates have been published since October 2024, when the IRS reported that about $700 billion in taxes went uncollected in 2022, with an expectation that roughly $90 billion would eventually be recovered.

The postponement coincides with broader shifts in the agency’s operations under the Trump administration, which implemented substantial budget cuts and reduced the IRS workforce by approximately 25%. These reductions have hampered the IRS’s capacity for time-intensive audits, which are key to identifying underreported income and enforcing tax compliance. A recent inspector general report noted a more than one-third decrease in revenue generated from audits in the last fiscal year, suggesting the tax gap may be expanding.

IRS Commissioner Frank Bisignano has expressed skepticism about the current tax gap measurement methodology, advocating a focus on what he terms the “addressable tax gap,” or the portion of unpaid taxes the IRS can realistically collect. In a statement, Bisignano emphasized increased enforcement revenues this year and highlighted the agency’s use of improved data analytics and technology, including artificial intelligence, to better target noncompliance. He also announced that Vincent LaPadula, a recent appointee from JPMorgan Chase & Co., will lead the agency’s tax gap initiatives.

This development has sparked debate among former and current tax officials. Critics argue that the lack of timely tax gap data obscures the impact of the administration’s downsizing of the IRS and limits policymakers’ ability to fully assess compliance trends. Natasha Sarin, a Treasury official during the Biden administration, expressed concern that without up-to-date metrics, the full consequences of reduced enforcement may remain hidden.

The tax gap estimate is derived from extensive, though statistically imprecise, audits that extrapolate noncompliance trends from a sample of returns. Due to the lengthy process of gathering audit data, these estimates often rely on analyses of filings from previous years—in the case of the 2022 figure, data from 2014 to 2016 were used. Former IRS analyst Alan Plumley noted that these constraints reduce the usefulness of annual headline numbers, suggesting the estimates should be interpreted with caution.

While there was bipartisan support for enhancing IRS funding to reduce the tax gap in previous years—given that closing the gap can increase federal revenue without raising tax rates—political opposition intensified after Congress approved an $80 billion budget increase for the agency in 2022. Subsequent Republican-led efforts successfully reversed much of this funding boost and challenged the credibility of the IRS’s tax gap measurements, with some critics arguing it disproportionately implicates wealthy taxpayers.

Experts acknowledge that targeting the “addressable” portion of the tax gap could improve enforcement efficiency, but stress the importance of maintaining consistent reporting standards to track long-term compliance trends. Daniel Werfel, a former IRS director under President Biden, emphasized the need to clarify what is considered “addressable,” noting this determination depends heavily on Congressional appropriations and tax legislation.

As the IRS updates its methodology and refines its enforcement approach, observers will be watching closely for the release of the next tax gap estimate, which remains a critical metric for understanding the effectiveness of tax collection efforts in the United States.