Federal tax fraudsters are getting away with as much as $304 billion in unpaid and underpaid taxes and by filing false claims for tax refunds, yet the IRS “doesn’t have an antifraud strategy,” according to a new analysis by the Government Accounting Office (GAO).

“We estimate that the federal government could lose between $116 billion and $304 billion annually to tax fraud. Tax fraud includes people or businesses intentionally failing to pay or deliberately underpaying the taxes they owe. It also includes criminals using stolen identity information to obtain taxpayer refunds,” GAO said in the report made public September 25.

“While the IRS is working to safeguard taxpayer dollars, it doesn’t have an antifraud strategy. It also hasn’t designated a lead office to manage antifraud activities across the agency. Both are important to address tax fraud in a strategic and coordinated way,” added GAO, which is the investigative arm of Congress.

The GAO estimate of annual losses is based on data gleaned from tax years 2018 through 2022 and represents in the latter year from 2 to 6% of the $4.6 trillion tax revenues owed by individuals, businesses, and corporations.

The hundreds of billions lost to tax fraud every year is due in great part to the federal agency lacking a systematic strategy to prevent such activities, according to the GAO. “IRS has routinely assessed fraud risks consistent with leading practices for fraud risk management. However, the agency has not developed an antifraud strategy or designated an antifraud entity to mitigate fraud risks in a strategic and coordinated manner.”

Having “an antifraud strategy could help IRS better manage fraud risks, which in turn could help reduce revenue lost to tax fraud. Further, designating an antifraud entity to undertake key fraud risk management activities — such as coordinating antifraud initiatives across the agency — would help IRS better mitigate the billions of dollars lost to fraud each year.”

Officials at the IRS, however, strongly disagreed with GAO’s conclusions. In a September 10 response, IRS Chief Executive Officer (CEO) Frank Bisignano said, “The IRS is concerned that the report does not sufficiently distinguish fraud with broader taxpayer noncompliance, resulting in conclusions that do not fully reflect the IRS’s approach to addressing these issues.” Fraud typically represents intentional acts that may ultimately result in criminal investigation, prosecution by the Department of Justice, and adjudication by the courts.

“While the report contains examples of adjudicated fraud cases, it also characterizes a broader range of noncompliance cases as fraud,” Bisignano continued. “Instances of noncompliance, such as underreported income or inaccurate reporting, do not necessarily meet the legal threshold for fraud. These types of noncompliance cases reflect errors, omissions, or other forms of noncompliance that are effectively addressed through established compliance programs, such as civil examinations, automated compliance programs, refund reversals, assessments, penalties, or taxpayer self-correction.”

The IRS CEO also questioned the GAO’s recommended course of action to remedy the problem, pointing out, “While GAO suggests additional centralized oversight, the IRS believes additional analysis would be helpful to demonstrate how greater centralization would materially improve outcomes, given the IRS’s existing high level of tax fraud risk coverage, or provide evidence that the potential benefits would outweigh the associated operational costs.”

The federal tax agency’s own internal analyses of the scope, depth, and nature of fraud in the tax system conclude that about 15% of the total revenue that should be paid is never received by the IRS, including amounts not paid due to mistakes in reporting or return calculations, as well as purposeful fraud. For 2022, the most recent year of the agency’s internal analyses, it found that 15% represented nearly $700 billion in revenues not received.

The internal IRS analyses of how successfully the agency prevents fraud related to identify theft conclude that 99% of such activity is defeated, resulting in nearly $30 billion in fraudulent refunds going unpaid. Even so, IRS estimates it still pays out nearly $250 million in refunds that should not be issued.

The tax agency, working in conjunction with the Department of Justice (DOJ), assessed 1,400 civil fraud penalties in 2024, and 615 individuals were charged, tried, and convicted of crimes associated with criminal tax fraud.

The latest GAO analysis of the depth and extent of waste, fraud, and corruption in federal spending and programs, and the IRS response, comes as the White House Task Force to Eliminate Fraud established in March and headed by Vice President J.D. Vance claims to have exposed $260.7 billion lost to such activity in the federal bureaucracy.