OTHER INFORMATION (UNAUDITED) 212

United States Government

Other Information (Unaudited) for the

Years Ended September 30, 2019, and 2018

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 2017

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 .................... 34,167 19,440 1,990 569 58 10.2%

$15,000 under $30,000........ 29,474 652,767 18,925 22,147 642 2.9%

$30,000 under $50,000........ 27,125 1,062,968 59,757 39,188 2,203 5.6%

$50,000 under $100,000...... 34,467 2,457,203 218,619 71,291 6,343 8.9%

$100,000 under $200,000.... 19,951 2,707,841 340,993 135,725 17,092 12.6%

$200,000 under $500,000.... 6,215 1,770,816 339,963 284,926 54,700 19.2%

$500,000 or more................ 1,505 2,338,866 625,034 1,554,064 415,305 26.7%

 Total ............................... 152,904 11,009,901 1,605,281
 213 OTHER INFORMATION (UNAUDITED)

Corporate Income Tax Liability for Tax Year 2016

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 ................................ 32,008 10,314 32.2%

$1 under $500............................. 7,032 1,337 19.0%

$500 under $1,000 ...................... 3,716 901 24.2%

$1,000 under $5,000 ................... 13,109 3,879 29.6%

$5,000 under $10,000.................. 8,362 2,678 32.0%

$10,000 under $25,000................ 13,270 4,309 32.5%

$25,000 under $50,000................ 12,686 4,163 32.8%

$50,000 under $100,000.............. 14,401 4,630 32.2%

$100,000 under $250,000............ 24,546 7,883 32.1%

$250,000 under $500,000............ 26,100 7,715 29.6%

$500,000 under $2,500,000 ......... 105,577 31,259 29.6%

$2,500,000 or more ..................... 1,010,414 237,291 23.5%

 Total ...................................... 1,271,221 316,359

Tax Gap

The 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 Fiscal Year 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: nonfiling, 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.

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.

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 further detailed information on the

Tax Gap, refer to the Treasury’s financial statements.
OTHER INFORMATION (UNAUDITED) 214

Tax Expenditures

As discussed in greater detail in Note 17—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 fiscal year 2020 Midsession Review. The largest tax expenditures in fiscal year 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 Taxpayer’s 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 

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. 
 215 OTHER INFORMATION (UNAUDITED)

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 fiscal year 2020 Budget provided a presentation of the 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 the Treasury’s Office of Tax Policy https://home.treasury.gov/policy-issues/taxpolicy/tax-expenditures. 
OTHER INFORMATION (UNAUDITED) 216

Unmatched Transactions and Balances

Unmatched Transactions and Balances as of September 30, 2019 and 2018

Restated

Fiscal Year Fiscal Year

(in millions of dollars) 2019 2018

Change in intragovernmental unmatched balances:

Benefit program contributions payable/receivable..................... 30.5 0.5

Accounts payable/receivable................................................... 16.2 58.6

Advances from/to others & deferred credits/prepayments ......... 308.2 (406.8)

Fund balance with Treasury.................................................... (184.8) 640.1

170.1 292.4

Unmatched intragovernmental transactions:

Borrowings interest revenue/expense-exchange ...................... - 62.0

Non-expenditure transfers-in/out ............................................. - (475.1)

Expenditure transfers-in/out*................................................... - 2,118.5

Custodial transfers non-exchange*.......................................... 388.9 -

Transfers-in/out without reimbursement ................................... - 7.1

Benefit program revenue/cost ................................................. 646.6 339.7

Non-reciprocating................................................................... (4,726.2) 4,884.5

Appropriations expended........................................................ - (102.2)

Appropriations used ............................................................... - 102.2

Appropriations received/warrants issued.................................. - 154.3

Custodial and non-entity collections transferred out/in .............. - (6,450.7)

Other taxes and receipts/trust fund warrants ............................ - (1,513.2)

Other..................................................................................... 1,896.3 2,959.2

(1,794.4) 2,086.3

Unmatched transactions and balances, net ................................ (1,624.3) 2,378.7

( ) Parentheses indicate a decrease to Net Position.

* The fiscal year 2018 amounts for Custodial transfers non-exchange are included under "Expenditure transfers-in/out."

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 intragovernmental 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 intragovernmental transactions. The federal community considers the

identification and accurate reporting of intragovernmental activity a priority.