Tax cheating costs the federal government somewhere between $116 billion and $304 billion a year, according to an estimate from the Government Accountability Office (GAO) released September 25. The same report credits an IRS screening system with blocking $88 billion in invalid refund payments from 2018 through 2024. GAO also found that the agency has no antifraud strategy and no designated antifraud entity.
A $188 billion gap between the low and high estimate
GAO’s report GAO-26-107810 gives a range, not a single figure. Subtracting the low end from the high end, $304 billion minus $116 billion, leaves a spread of $188 billion, which shows how much uncertainty sits inside the estimate. GAO says the range equals roughly 2 percent to 6 percent of the tax owed to the federal government for tax year 2022.
The auditors built the range with a Monte Carlo simulation, a probabilistic method for estimating ranges under uncertainty, using IRS data from 2018 through 2024. Three categories fed the model: adjudicated fraud cases, the part of the tax gap that may involve fraud, and tax evasion in the shadow economy. According to the full report, GAO acknowledges that “the actual amount of fraud could be outside the range” and that some fraud stays undetected.
Fraud, as GAO draws the line
GAO defines fraud as “willful misrepresentation to obtain something of value.” Honest mistakes do not count. A math error, a misunderstood credit or an inability to pay a bill the household owes are noncompliance, and the report separates them from deliberate underpayment and from identity-theft schemes aimed at refunds.
That distinction explains why the numbers matter beyond Washington. The report’s headline figure is a loss to the federal government as a whole, not to any single program.
The Return Review Program and the $88 billion
The $88 billion comes from the Return Review Program, an automated system that screens refund claims for “characteristics indicative of identity theft and other tax refund fraud,” as GAO describes it. The figure is an IRS number that GAO reports: the agency says the program prevented about $88 billion in invalid, and potentially fraudulent, refund payments across 2018 through 2024.
The period matters. The $88 billion accumulated over seven years, so it is not an annual total and cannot be set against the $116 billion to $304 billion annual loss estimate as though the two covered the same year. The $88 billion also counts refunds stopped before payment, which is a different thing from tax cheating on returns that were never screened out. The report summary does not put a figure on how many legitimate refunds the screens held up along the way.
A missing strategy and a missing owner
GAO’s central criticism is organizational. The report finds that “IRS has not developed an antifraud strategy or designated an antifraud entity,” even though the agency has identified fraud risks. GAO measures that against its own Fraud Risk Framework, which calls for a documented strategy and a designated body that coordinates and oversees fraud risk management.
Rebecca Shea, director of GAO’s Forensic Audits and Investigative Service, is the lead contact on the report, alongside Jared B. Smith, the agency’s chief statistician. Their findings land the same month the IRS announced work on the front end of the problem. The IRS September release list carries a September 4 item on strengthening defenses against tax-related identity theft and a September 16 Security Summit data security reminder. Neither release is a response to the GAO report, which came later.
Two recommendations, both still open
GAO made two recommendations to the IRS Commissioner. The first is to “develop and document an agency-wide antifraud strategy.” The second is to “designate an antifraud entity responsible for coordinating and overseeing fraud risk management activities.” GAO lists the status of both as open.
The IRS “partially agreed” with each. On the strategy, the agency said it will continue to document its efforts and consider developing one, language that falls short of a commitment, and GAO maintains the IRS should develop it. On the entity, the IRS pointed to its Chief Tax Compliance Officer as the responsible official, while GAO notes the designated body must take on all of the coordination duties and document them.
What stays unresolved for ordinary filers
For a household waiting on a refund, the report changes nothing this filing season; no new screen, deadline or form comes out of it. What it does is put two numbers side by side: a very large estimated loss, and a very large amount stopped. It then says the agency running both efforts has not written down a single plan tying them together.
Whether the IRS ends up adopting a formal strategy is a question the open recommendations leave to the agency and, if GAO follows up, to later reporting from the auditors. Until then, the controlling record is GAO’s published report and the IRS’s recorded response to it.
When a federal refund stops moving after filing
Fraud screening is one reason a legitimate refund can sit in review, and it is only one of several. Offsets, identity verification and a smaller refund than expected account for many of the others.
The IRS Refund Recovery Kit is a 13-page kit that includes a notice decoder and a refund status tracker spreadsheet for keeping IRS notices and dates in one place.
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AI helped draft this article; its figures and quotations were checked against GAO’s published report.
