OTHER INFORMATION (UNAUDITED) 212

United States Government

Other Information (Unaudited) for the

Years Ended September 30, 2021, and 2020

Tax Burden

The IRC 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 2019

Average Average

Total Adjusted Income Income

Number of Adjusted Income Gross 

Income

Tax per Tax as a 

Taxable Gross Income Tax per Return Return Percentage

Returns (In millions (In millions (In whole (In whole of Adjusted

Adjusted Gross Income (In thousands) of dollars) of dollars) dollars) dollars) Gross Income

Under $15,000 ................................ 30,881................................ 237,255 ................................ 391 7,683................................ 13 ................................ 0.2% ..

$15,000 under $30,000 ................................ 28,823 ................................ 643,794 15,069................................ 22,336 ................................ 523 2.3%......................

$30,000 under $50,000 ................................ 28,594 1,120,332 ................................ 51,692................................ 39,181 ................................ 1,808 4.6%......................

$50,000 under $100,000 ................................ 36,357 2,589,840 ................................ 192,888 ................................ 71,234 5,305 ................................ 7.4%....................

$100,000 under $200,000 ................................ 21,998 3,004,364 ................................ 333,838 ................................ 136,574 15,176 ................................ 11.1% ..................

$200,000 under $500,000 ................................ 7,298 2,090,809 ................................ 348,843 ................................ 286,491 47,800 ................................ 16.7% ..................

$500,000 or more ................................ 1,719 ................................ 2,517,544 638,389 ................................ 1,464,540 ................................ 371,372 ..............................25.4% 

 Total................................................................ 155,670 12,203,938 ................................ 1,581,110 ..............................................................................
213 OTHER INFORMATION (UNAUDITED)

Corporate Income Tax Liability for Tax Year 2018

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 ................................................................ 55,884 ................................ 11,595................................ 20.7%.....................................

$1 under $500................................................................ 7,829 ................................ 1,569 ................................ 20.0%..................................

$500 under $1,000 ................................................................ 4,829 ................................ 956 ................................ 19.8% ...........................

$1,000 under $5,000 ................................................................ 17,223 ................................ 3,496 ................................ 20.3% ........................

$5,000 under $10,000................................10,086 ................................................................ 2,016 ................................ 20.0% .......................

$10,000 under $25,000................................19,143 ................................................................ 3,805 ................................ 19.9% .....................

$25,000 under $50,000................................14,385 ................................................................ 2,812 ................................ 19.5% .....................

$50,000 under $100,000................................ 16,854 ................................................................ 3,294 ................................ 19.5% ...................

$100,000 under $250,000 ................................ 25,808................................................................ 4,773 ................................ 18.5% .................

$250,000 under $500,000 ................................ 26,192................................................................ 4,679 ................................ 17.9% .................

$500,000 under $2,500,000 ................................ 126,275................................20,836 ................................................................ 16.5% ..............

$2,500,000 or more ................................1,632,171 ................................................................ 184,856 ................................ 11.3% ..........................

 Total ................................................................ 1,956,679 ................................ 244,687 ...........................................................................

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 $4.5 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. For additional information on the tax gap, refer to Treasury’s financial statements.

1

Individual amounts may not add to totals due to rounding.
OTHER INFORMATION (UNAUDITED) 214

Tax Expenditures

As discussed in greater detail in Note 20—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 2022 Midsession Review. The largest tax expenditures in FY 2021 are the following (and see

the table below):

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

premiums, and premiums for long-term care insurance;

• 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);

• 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;

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

• In taxable year 2021, taxpayers may claim a credit for up to $3,600 per child under age six and up to $3,000 per

child age six through 17 (figure in table only includes non-refundable portion of credit)

Largest Income Tax Expenditures as of September 30, 2021

(In billions of dollars) 2021

Exclusion of employer contributions for medical insurance premiums & health care................................ 221.5............................

Defined benefit & defined contribution pension funds ................................................................................................ 170.4 .......

Exclusion of net imputed rental income ................................................................................................ 124.1...........................

Preferential tax rates on long term capital gains ................................................................................................ 102.3 ...............

Child tax credit...............................................................................................................................................................72.6 

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:

• 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.

• 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)

• 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 35.0 percent tax rate, but only $2,100 at a 21.0 percent tax rate.

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.

Unmatched Transactions and Balances

Unmatched Transactions and Balances as of September 30, 2021, and 2020

Restated

(In millions of dollars) 2021 2020

Statement of Operations and Changes in Net Position:

Custodial transfers non-exchange ................................................................ (532.4) ................................ (622.8) ..................................

Benefit program revenue/cost ................................................................................................ 651.5 ................................ 601.9 ........

Non-reciprocating................................................................................................ (3,761.3) ................................ 4,147.0 ..........................

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

Custodial and non-entity collections transferred out/in ................................629.5 ................................ 1,003.9 .....................................

Accrual amounts collected/transferred in................................................................ (209.4) ................................ 326.8 .........................

Other................................................................................................................................ 3,057.0 ................................ 5,933.2 ............

(165.1) 11,458.0

Balance Sheet:

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

Accounts payable/receivable................................................................................................ 556.3 ................................ (65.0) ..........

Advances from/to others & deferred credits/prepayments ................................ (898.3)................................ (385.3)................................

Non-reciprocating................................................................................................ (320.2) ................................ (355.3) ..........................

Fund balance with Treasury................................................................................................ (899.2) ................................ (1,100.9) ...........

Other................................................................................................................................ (116.1) ................................ - ............

(1,677.5) (3,062.4)

Unmatched transactions and balances, net ................................................................ (1,842.6) ................................ 8,395.6 .......................

( ) Parentheses indicate a decrease to Net Position.

The unmatched transactions and balances are needed to balance the accrual-based financial statements. Both the

Statement of Operations and Changes in Net Position and the Balance Sheet include a line for the unmatched transactions and

balances, while the unmatched transactions and balances are recorded in existing lines in the Statement of Net Cost.

Transactions and balances between federal entities must be eliminated in consolidation to calculate the financial position of

the government. The amounts included in the table represent intra-governmental 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, and thus, are not reported in the

table above. The adjustments were added to, or subtracted from, gross cost in the Statement of Net Cost in the year they were

recorded. Unresolved intra-governmental differences (i.e., unmatched transactions and balances) result in errors in the

consolidated financial statements. The ultimate effect on the accrual-based financial statements of resolving and correcting

these differences has not been fully determined and could be material.

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
OTHER INFORMATION (UNAUDITED) 216

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.

The FY 2020 Statement of Operations and Changes in Net Position section of the Unmatched Transactions and

Balances table is restated. A reevaluation of construction-in-progress was made based on DOD’s department-wide effort to

improve financial reporting. The prior year adjustment affected the Other line on the Unmatched Transactions and Balances

table as the adjustments were non-federal.

In FY 2021, a change in presentation has been made to the Unmatched Transactions and Balances table to be consistent

with how balances impact net position on the Balance Sheet and the Statement of Operations and Changes in Net Position.

The unmatched transactions and balances, net reflects the combined impact that each statement line has on the overall

net position of the Financial Report.