The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time. The Internal Revenue Service collects more than $2 trillion annually in taxes so producing an estimate of the tax gap is a major statistical effort that it undertakes every few years.

This month, the IRS released a new set of tax gap estimates for tax year 2006. The new tax gap estimate represents the first full update of the report in five years, and it shows the nation´s compliance rate is essentially unchanged at about 83 percent from the last review covering tax year 2001.

The net tax gap for 2006 is estimated to be $385 billion. The net tax gap takes into account receipts from enforcement activities and late payments.

Since IRS Commissioner Doug Shulman began his five-year term in March 2008, virtually all major initiatives launched by the IRS since 2008 have been designed to focus on the tax gap through more effective enforcement or improved service to taxpayers.

The tax gap statistic is a helpful guide to the scale of tax compliance and to the persisting sources of low compliance, but it is not an adequate guide to year-to-year changes in IRS programs or to year-to-year returns on IRS service and enforcement initiatives.

Tax gap estimates take years to produce. For example, taxpayers have until late 2007 to file 2006 tax returns, and it takes several years to measure IRS enforcement of those liabilities from 2006. Furthermore, statistically valid estimates require resource-intensive, time-consuming research gathered from a wide range of sources, including statistically selected audits of taxpayers. Other information, such as income and expenditure information from other sources, additional financial information, and information about best practices in tax return examination, supplement the audit findings.