OTHER INFORMATION (UNAUDITED) 210

United States Government 

Other Information (Unaudited) for the 

Years Ended September 30, 2020, and 2019 

Tax Burden 

The Internal Revenue Code provides for progressive tax rates, whereby higher earned income is generally subject to 

higher tax rates. The following tables present the latest available information on income tax and related income, deductions, 

and credit: for individuals by income level, and for corporations by size of assets. 

Individual Income Tax Liability for Tax Year 2018 

Average 

Total Average Income 

Number of Income AGI Per Tax per Income 

Taxable AGI Tax Return Return Tax as a 

Adjusted Gross Income Returns (In millions (In millions (In whole (In whole Percentage 

(AGI) (In thousands) of dollars) of dollars) dollars) dollars) of AGI 

Under $15,000 .................... 32,618 40,228 591 1,233 18 1.5%

$15,000 under $30,000 ........ 28,782 640,648 14,894 22,259 517 2.3%

$30,000 under $50,000 ........ 27,528 1,078,886 49,485 39,192 1,798 4.6%

$50,000 under $100,000 ...... 35,146 2,507,316 186,826 71,340 5,316 7.5%

$100,000 under $200,000 .... 21,146 2,878,203 320,536 136,111 15,158 11.1%

$200,000 under $500,000 .... 6,906 1,971,306 327,806 285,448 47,467 16.6%

$500,000 or more ................ 1,648 2,526,852 638,611 1,533,284 387,507 25.3%

 Total ............................... 153,774 11,643,439 1,538,749 
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Corporate Income Tax Liability for Tax Year 2017 

Percentage of 

Income Subject Total Income Tax Income Tax After 

Total Assets to Tax After Credits Credits to 

(In thousands of dollars) (In millions of dollars) (In millions of dollars) Taxable Income 

Zero Assets ................................ 25,145 7,740 30.8% 

$1 under $500 ............................. 7,611 1,514 19.9% 

$500 under $1,000 ...................... 3,784 950 25.1% 

$1,000 under $5,000 ................... 13,638 4,011 29.4% 

$5,000 under $10,000 .................. 8,617 2,727 31.7% 

$10,000 under $25,000 ................ 12,535 4,021 32.1% 

$25,000 under $50,000 ................ 11,831 3,809 32.2% 

$50,000 under $100,000 .............. 13,496 4,391 32.5% 

$100,000 under $250,000 ............ 21,275 6,652 31.3% 

$250,000 under $500,000 ............ 20,996 6,790 32.3% 

$500,000 under $2,500,000 ......... 85,366 25,998 30.5% 

$2,500,000 or more ..................... 777,981 196,257 25.2% 

 Total ...................................... 1,002,275 264,860 

Tax Gap 

The gross tax gap is the difference between the amount of tax imposed by law and what taxpayers actually pay on time. 

The tax gap provides an estimate of the level of overall noncompliance and voluntary compliance during the relevant tax 

periods. Tax gap estimates provide periodic appraisals about the nature and extent of noncompliance for use in formulating 

tax administration strategies. Estimating the tax gap is inherently challenging and requires assessing the merits of alternative 

methods, assumptions, and data sources. There is no single approach that can be used for estimating all the components of the 

tax gap, so multiple methods are used. The most recent estimates covering the Tax Year 2011-2013 timeframe were released 

in FY 2019. 

The gross tax gap is the amount of a tax liability that is not paid voluntarily and on time. The estimated annual average 

gross tax gap is $441.0 billion. The gross tax gap is comprised of three components: non-filing, underreporting, and 

underpayment. The estimated gross tax gap for each of these components is $39.0 billion, $352.0 billion, and $50.0 billion, 

respectively. The gross tax gap estimates are also segmented by type of tax; individual income tax, corporation income tax, 

employment tax, and estate and excise tax. The estimated gross tax gap for each of these types of tax is $314.0 billion, $42.0 

billion, $81.0 billion, and $3.0 billion, respectively. 1

The net tax gap is the gross tax gap less tax that subsequently will be paid either late through voluntary payments or 

collected through IRS administrative and enforcement activities and is the portion of the gross tax gap that will not be paid. It 

is estimated that $60.0 billion of the gross tax gap will eventually be paid resulting in a net tax gap of $381.0 billion. The net 

tax gap estimates are also segmented by type of tax; individual income tax, corporation income tax, employment tax, and 

estate and excise tax. The estimated net tax gap for each of these types of tax is $271.0 billion, $32.0 billion, $77.0 billion, 

and $1.0 billion, respectively. 

1

 Individual amounts may not add to totals due to rounding. 
OTHER INFORMATION (UNAUDITED) 212

The IRS remains committed to finding ways to increase compliance and reduce the tax gap, while minimizing the 

burden on the vast majority of taxpayers who pay their taxes accurately and on time. For additional information on the Tax 

Gap, refer to Treasury’s financial statements. 

 

Tax Expenditures 

The President’s FY 2022 Budget will not be released before publication of the Financial Report for FY 2020. The tax 

expenditures reported below reflect the narrative and amounts previously published in the FY 2019 Financial Report. 

As discussed in greater detail in Note 18—Collections and Refunds of Federal Revenue, tax and other revenues reported 

reflect the effects of tax expenditures, which are special exclusions, exemptions, or deductions or which provide tax credits, 

preferential tax rates or deferrals of tax liability, that allow individuals and businesses to reduce taxes they may otherwise 

owe. 

The figures reported in the following table are estimates of tax expenditures using data from previous years and 

economic forecast from the FY 2020 Midsession Review. The largest tax expenditures in FY 2019 are the following (and see 

the table below): 

x The exclusion from workers’ taxable income of employers’ contributions for health care, health insurance 

premiums, and premiums for long-term care insurance; 

x The exclusion of contributions to and the earnings of employer defined benefit and defined contribution pension 

funds (minus pension benefits that are included in taxable income); 

x Imputed rental income forms part of the total value of goods and services produced in a country. But unlike returns 

from other investments, the return on homeownership “imputed rent” is excluded from taxable income. In contrast, 

landlords must count as income the rent they receive, and renters may not deduct the rent they pay. A homeowner is 

effectively both landlord and renter, but the tax code treats homeowners the same as renters while ignoring their 

simultaneous role as their own landlords and exempting potential rent they would have paid themselves; 

x Preferential tax rates on long-term capital gains; and 

x Taxpayers with children under age 17 can qualify for a $2,000 per child tax credit (figure in table includes nonrefundable portion of credit). 

Largest Income Tax Expenditures as of September 30, 2019 

(In billions of dollars) 2019 

Exclusion of employer contributions for medical insurance premiums & health care..................... 202.3 

Defined benefit & defined contribution pension funds ................................................................ 147.3 

Exclusion of net imputed rental income .................................................................................... 121.3 

Preferential tax rates on long term capital gains ........................................................................ 111.5 

Child tax credit ........................................................................................................................ 74.9 

Generally, identifying and measuring a tax expenditure requires defining a baseline tax system against which identified 

tax provisions are exceptions. The tax expenditures prepared for the Budget are estimated relative to a simplified 

comprehensive income tax, which defines income as the sum of consumption and the change in net wealth in a given period 

of time. Tax expenditure estimates do not necessarily equal the increase in federal revenues (or the change in the budget 

balance) that would result from repealing these special provisions, for the following reasons: 

x Eliminating a tax expenditure may have incentive effects that alter economic behavior, which can affect the resulting 

magnitudes of the activity or of other tax provisions or government programs. For example, if capital gains were 

taxed at ordinary rates, capital gain realizations would be expected to decline, resulting in lower tax receipts. Such 

behavioral effects are not reflected in the estimates. 

x Tax expenditures are interdependent even without incentive effects. Repeal of a tax expenditure provision can 

increase or decrease the tax revenue effect of other provisions. For example, even if behavior does not change, 

repeal of an itemized deduction could increase revenue costs from other deductions as some taxpayers move into 
 213 OTHER INFORMATION (UNAUDITED)

higher tax brackets. Alternatively, an itemized deduction repeal could lower the revenue foregone from other 

deductions if taxpayers choose to claim the standard deduction over itemizing. Similarly, if two provisions were 

repealed simultaneously, the tax liability increase could be greater or less than the sum of the two separate tax 

expenditures, because each is estimated assuming that the other remains in force. 

x Repeal effects may depend on concurrent tax rate changes. Lowering or raising tax rates can decrease or increase the 

estimated revenues from a particular provision. A $10,000 charitable contributions deduction is worth $3,500 in 

corporate tax revenues at a 35 percent tax rate, but only $2,100 at a 21 percent tax rate. 

The President’s FY 2020 Budget provided a presentation of Treasury’s review of the tax expenditure budget. It focused 

on potential alternative baselines to a comprehensive income tax, including using a consumption tax, and defining negative 

tax expenditures (provisions that cause taxpayers to pay too much tax). Relative to a consumption tax baseline, a number of 

current tax provisions would be negative tax expenditures. More specifically, a consumption tax will not extend to saving or 

capital income. As an example, the exclusion for contributions to and earnings from retirement accounts would not be treated 

as a tax expenditure. Some of these also may not necessarily be negative tax expenditures under a comprehensive income tax 

as a baseline; the current reference law and normal law baselines represent a simplified version of comprehensive income. As 

an example, some medical expenditures may not be discretionary and perhaps should be excluded from income. 

A more comprehensive ranking, including rankings over a 10 year period, and descriptions of tax expenditures can be 

found at the following location from Treasury’s Office of Tax Policy https://home.treasury.gov/policy-issues/tax-policy/taxexpenditures. 

 
OTHER INFORMATION (UNAUDITED) 214

Unmatched Transactions and Balances 

Unmatched Transactions and Balances as of September 30, 2020 and 2019 

Restated 

(In millions of dollars) 2020 2019 

Balance Sheet: 

Custodial and non-entity liability/asset ..................................... (1,155.9) - 

Benefit program contributions payable/receivable ..................... - 109.2 

Accounts payable/receivable ................................................... (65.0) 450.1 

Advances from/to others & deferred credits/prepayments ......... (385.3) (442.8)

Non-reciprocating ................................................................... (355.3) (12,891.3)

Fund balance with Treasury .................................................... (1,100.9) (1,974.7)

(3,062.4) (14,749.5)

Statement of Operations and Changes in Net Position: 

Custodial transfers non-exchange ........................................... 622.8 388.9 

Benefit program revenue/cost ................................................. (601.9) 646.6 

Non-reciprocating ................................................................... (4,147.0) (3,318.3)

Appropriations received/warrants issued .................................. (68.0) - 

Custodial and non-entity collections transferred out/in .............. (1,003.9) - 

Accrual amounts collected/transferred in .................................. (326.8) - 

Other ..................................................................................... (6,071.0) 1,896.3 

(11,595.8) (386.5)

Unmatched transactions and balances, net ................................ (14,658.2) (15,136.0)

( ) Parentheses indicate a decrease to Net Position. 

The Statement of Operations and Changes in Net Position includes an amount for unmatched transactions and balances 

that result from the consolidation of federal reporting entities. Transactions between federal entities must be eliminated in 

consolidation to calculate the financial position of the government. Many of the amounts included in the table represent intragovernmental activity and balances that differed between federal entity trading partners and often totaled significantly more 

in the absolute than the net amounts shown. The table also reflects other consolidating adjustments and other adjustments that 

contributed to the unmatched transactions and balances amount. A number of lines in the “Unmatched Transactions and 

Balances” table were adjusted to zero after intra-governmental difference analysis determined they were immaterial at or 

below $0.1 billion. The adjustments were added to, or subtracted from, gross cost in the Statement of Net Cost. 

Unmatched transactions and balances between federal entities impact not only in the period in which differences 

originate but also in the periods where differences are resolved. As a result, it would not be proper to conclude that increases 

or decreases in the unmatched amounts shown in the “Unmatched Transactions and Balances” table reflect improvements or 

deteriorations in the government’s ability to resolve intra-governmental transactions. The federal community considers the 

identification and accurate reporting of intra-governmental activity a priority. 

In FY 2020, a change has been made to the “Unmatched Transactions and Balances” table to display all unmatched 

transactions and balances in a more consistent manner. The table was changed to display all unmatched transactions and 

balances between federal entities as the net amount, rather than a change year over year for balance sheet activity as was 

previously displayed. The top section reflects unmatched intra-governmental transactions and balances associated with assets 

and liabilities impacting the Balance Sheet. The lower section reflects unmatched intra-governmental transactions and 

balances associated with current year activity impacting the Statement of Operations and Changes in Net Position. Note, 

although the section is titled Statement of Operations and Changes in Net Position, the net intra-governmental difference may 

represent the combination of Statement of Operations and Changes in Net Position and, in some instances, activity on the 

Statement of Net Cost. For comparative purposes, FY 2019 Unmatched Transactions and Balances were also restated as a 

result of this change.