9+ Tax Evasion Statistics To See Who Dodges the Most

In theory, paying taxes is a voluntary civic duty… Except for the fact that it’s illegal not to carry out this exact civic duty.

And you know what could totally ruin your mood?

Going to court with the IRS for not doing your political obligations as a citizen. The latest tax evasion statistics reveal that hundreds of offenders did so last year.

But did they go to jail?

What’s tax evasion?

What are the penalties for tax fraud in the USA?

If you don’t know, there’s a good chance you’re innocent enough. But if you want to know, here’s a good breakdown that makes all that legal nonsense make perfect sense.

The Shocking Tax Evasion Stats (Editor’s Choice):

• Tax compliance in the US reached 85% for the 2014-2016 period.
• One out of every six dollars of federal tax was not paid in 2019.
• The gross tax gap was $496 billion in 2016, and projections for 2019 are for a gap of $540 billion.
• Federal tax crimes cost the US $19 trillion annually.
• Apple was the American company that held the most cash offshore in 2016.
• 370 Americans received sentences for tax offenses in 2021.
• Two-thirds of the tax offenders went to prison.
• The jail time for tax fraud can last up to 5 years with additional financial penalties.

What Are The Average Taxes Paid In The US?

It’s difficult to pin down one specific percentage to consider average.

Because of the progressive tax system of the US, people fall in a variety of tax brackets, so it would be better to take a look at the median.

But since some people are a part of higher tax brackets, it’s easy to imagine why they would evade tax. What happens next is an imminent discrepancy between the average expected taxes and the paid ones.

So, how much is evaded each year, and how does this “tax theft” contribute to the American tax gap?

Let’s find out!

1. The average tax rate comes at 13.3%.

(Source: the balance)

If we were to consider the simple average of the seven tax brackets, with 10% being the lowest and 37% the highest, the math would be easy. That’s an average of 24.57%. Yet, the 24% bracket is not the most common one.

The 15% one is. Over 42 million fall into it, and correspondingly, when we derive the average from the upper 50% of taxpayers and the lower 50%, it comes to 13.3%.

Interesting fact: In 2018, the top 50% contributed 97.1% to the total federal income taxes. The average taxes paid per person in that group equated to $20,663, and the average tax rate came at 14.6%

2. You might be engaging in tax-evading behavior even without knowing it.

(Source: nerdwallet)

Tax evasion is the intentional concealment of income or any related information from the IRS, mainly through the use of illegal methods. However, it’s not always synonymous with sketchy and secretive actions, as it could easily happen without you doing anything elaborate.

Some examples of tax fraud—or tax evasion, which is the case for most ordinary people— could include paying or getting paid under the table and receiving income from overseas. For instance, if you babysit for someone and get money in return, then it’s considered income and must be reported.

Or if you have a rental in a different country, you can’t get away with not paying taxes for the rent you get. Cryptocurrency also has tax rules, and since it’s an asset, transactions associated with it are also something to report.

A surprising example of cheating on taxes: Even income from illegal activities is expected to be communicated with the IRS. In theory, selling drugs and engaging in prostitution should go on your report.

3. Tax compliance was relatively high for the 2014-2016 period.

(Source: IRS)

Tax compliance translates to the voluntary and timely payment of taxes and is something revised for every tax period. In practice, it explains the tax gap: normally, the higher the compliance, the smaller the wedge. 

The IRS tax evasion statistics make a good effort to assess it.

The 2014-2016 tax compliance estimates came at 85%, up from 83.7% for 2011-2013.

The period before that, 2008-2010, recorded 81.7%, which is overall a good sign. The drawback here is that the IRS announces compliance revisions long after the year being revised passes.

For example, the 2017-2019 period is still a projection of 85.1%. We still don’t know whether the projection has come true.

4. 2019 taxpayers willfully didn’t pay one out of every six dollars of the total federal tax.

(Source: Brookings) 

Obviously, this is due to the consistent number of tax fraud cases. As a result of these evasions, the IRS reports that the lack of compliance translates to one out of every six dollars owed remaining unpaid. 

The deliberate underpayment of taxes makes it very difficult for governments to allocate resources and could lead to mismanagement.

And unpaid taxes contribute to roughly 75% of the total tax budget deficit. So, what does that mean?

5. Tax cheats result in big-time losses for the government annually.

(Source: The New York Times)

The US has been predicted to collect $1 trillion in unpaid taxes for the past year. According to Senator of Oregon Ron Wyden, a tax gap of such kind is a “jaw-dropping figure”, so the surge of noncompliance is definitely a major concern currently.

To put it into perspective, the gap was half of what it is now just 10 years ago. For the 2011-2013 period, when compliance was 85%, the wedge stood at $441 billion. Projections for 2019 suggest a gap of $540 billion. 

We should also note what is the IRS tax gap. In simple terms, it’s the discrepancy between the money owed for a given tax period and the money that was actually paid by taxpayers on time.

Interesting Statistics On Tax Evasion Penalties

If you haven’t got a taste of the legal seriousness of tax evasion already, maybe now you will.

As a criminal action, tax fraud can easily put you in jail. And in fact, that was the fate of hundreds of Americans in the past year only.

The biggest tax evaders, the number of people penalized, and their sentences…

All of that and more in this section.

6. Out of all American corporations, Apple held the most cash offshore in 2016.

(Source: Credit Suisse)

It’s no secret that the wealthy and corporations are big on creative accounting.

Apple is an industry leader, and a big part of its success is owed to careful money management. According to the tax evasion statistics, Apple is at the top of that list, with $252.3 billion held overseas as it was last recorded in 2016.

Other IT companies complete the top three. Second comes Microsoft ($127.9 billion held offshore), and third is Cisco Systems Inc ($67.5 billion).

It’s a bit complicated to take whole corporations to court for engaging in such activities, but individual offenders are another case.

7. So, how many people go to jail for tax evasion?

(Source: US Sentencing Commission)

For the fiscal year 2021, 370 were accused, but not all of them went to jail. This was a slight increase from 2020, when the number of cases was 324.

However, the overall tendency is downward. In 2017, a whopping number of 598 people were sentenced, and by 2019, the number had reduced to 494. The largest YoY decrease was from 2019 to 2020, when there was a decline of 34.4%.

8. 63.3% of tax offenders went to prison.

(Source: US Sentencing Commission)

The tax evasion cases in 2021 terminated with about two-thirds of the convicted ending up in jail. This comes down to 234 people going to prison.

33.3% got away with either a financial penalty or none at all. Though not announced for the particular year, the fine you’d have to pay for a tax evasion conviction can go up to $100,000 for a person and $500,000 for a corporation.

9. The average tax evasion sentence was 14 months.

(Source: US Sentencing Commission)

And that’s a decrease from the 2017 average of 17 months. 

Though, it all comes down to the degree of the crime and the duration of the ongoing tax fraud. Generally, the longer you fabricate the magic numbers on your tax report and the more elaborate the scheme, the more likely you are to stay in jail for tax evasion for a longer period of time.

As a rule of thumb, though, imprisonment can’t last more than 5 years. However, it can be accompanied by thousands of dollars in financial penalties.

Wrap Up

Do these tax evasion statistics show why tax fraud has turned into a major concern for countries with large tax gaps like that of the US?

We hope so because it truly is a pretty big deal. While governments across the globe struggle with the allocation of resources, wealthy individuals and corporations take advantage of loopholes in money-hungry attempts to evade taxes.

But will any of them appear on our next tax evasion stats?