The federal government is losing $98 billion a year on small businesses and wealthy Americans either making mistakes or dodging taxes

• The IRS released new data on how much in taxes is still unpaid by Americans and businesses.
• From 2014 through 2016, the tax gap, which measures taxes owed versus paid, grew to nearly $500 billion.

The IRS isn't getting all of the money it's owed, and it's getting worse.

According to the latest data from the IRS, the divide between the amount filers owe and how much they're paying has grown to $496 billion for tax years 2014 to 2016.

That's a $58 billion increase from 2011 to 2013, the previous years for which the IRS released data. The agency also projects that the gap widened to an average of $540 billion yearly from 2017 to 2019.

"These findings underscore the importance of ensuring fairness in our nation's tax system," former IRS Commissioner Chuck Rettig said in a release. "The increase in the tax gap estimates reflects that the IRS needs to do more, both in improving taxpayer service as well as working to improve tax compliance."

The data also offers a glimpse into who is and isn't paying their taxes. For instance, there's a tax gap of $18 billion on capital gains, which taxes the sales of major assets. The amount you pay on the sales of a capital gain depends on your income; for instance, people earning below $41,675 had a 0% tax rate on long-term capital gains in 2022, while those making $539,901 or above pay 37%. Meanwhile, nonfarm proprietor income — which tracks income for small businesses that aren't incorporated — saw a tax gap of $80 billion.

Of course, those are just estimates. Rettig previously said that "it would not be outlandish to believe that the actual tax gap could approach and possibly exceed $1 trillion per year." The Treasury Department found that the top 1% of earners dodge $163 billion in taxes annually. In total, Treasury estimated the tax gap could be as high as $600 billion a year, which could cost the government $7 trillion in lost revenue over the next 10 years.

At the same time, the IRS has been contending with understaffing and a shrinking budget, which has led to an 80% decline in the audit rate for filers making over $1 million, according to the White House.

That gap could be shrinking soon, though: The recently passed Inflation Reduction Act contains $80 billion in funding for the IRS. About $46 billion of that is earmarked for beefing up enforcement, according to the Congressional Research Service. The nonpartisan Congressional Budget Office estimates that the spending on enforcement will bring in $204 billion in revenue over the next decade.