GAO: IRS Lacks Agency-Wide Antifraud Strategy Amid Up to $304B in Annual Tax Fraud Losses

The federal government loses between $116 billion and $304 billion each year to tax fraud, according to a Government Accountability Office (GAO) report released Friday, which found the IRS has no agency-wide strategy to combat the problem.

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The report highlights a significant gap in federal oversight, with billions in potential revenue lost annually and no comprehensive plan in place to address fraud risks across the IRS.

GAO's estimate, the first comprehensive federal assessment of tax fraud losses, used IRS data from 2018 through 2024 and applied a Monte Carlo simulation to analyze fraud within the tax gap and evasion in the shadow economy. For tax year 2022, the losses represented 2% to 6% of the $4.6 trillion in total true tax liability, or 17% to 43% of the $696 billion gross tax gap.

GAO’s Findings and Recommendations

GAO auditors found that the IRS lacks both an agency-wide antifraud strategy and a designated entity to oversee fraud risk management. Instead, responsibility for antifraud efforts is left to individual divisions, none of which have documented strategies of their own. The report recommended that the IRS develop and document a coordinated antifraud strategy and designate an entity to oversee and coordinate fraud risk management.

GAO cited the case of Carl Delano Torjagbo, who was sentenced in January 2026 to more than 14 years in prison for filing fraudulent tax returns and spending the proceeds on luxury items, as an example of the scale and impact of tax fraud.

"An antifraud strategy, either at the agency-wide or division level, would help IRS coordinate and communicate its overall approach to tax fraud risk management to ultimately mitigate such risks and reduce revenue lost to fraud."

— Rebecca Shea, director of forensic audits and investigative service, and Jared B. Smith, director of applied research and methods

GAO addressed its recommendations to the commissioner of internal revenue. The report was signed by Rebecca Shea and Jared B. Smith.

IRS Response and Dispute

The IRS partially agreed with GAO’s recommendations. In a letter dated Sept. 10, IRS CEO Frank J. Bisignano stated the agency would continue documenting antifraud work through existing programs and would "consider developing an agency wide antifraud strategy." On the recommendation to designate an antifraud entity, Bisignano said the Chief Tax Compliance Officer is already responsible for coordinating division tax fraud initiatives, risk assessments, communications, and fraud awareness efforts.

Bisignano disputed GAO’s framing, arguing the report "does not sufficiently distinguish fraud with broader taxpayer noncompliance" and that not all underreported or inaccurate filings meet the legal threshold for fraud. He also said the agency’s fraud governance is not fragmented, as responsibility is distributed to reflect varying and evolving fraud risks.

GAO rejected these points, stating its estimate excludes non-fraud noncompliance and uses a definition of fraud consistent with the IRS’s own. The auditors said their review included data on criminal fraud, civil fraud, and identity theft from multiple divisions.

IRS spokesperson John Fuld referred questions to the agency’s written response and Bisignano’s letter, declining to comment on whether a new antifraud strategy would be developed or when the Chief Tax Compliance Officer assumed antifraud duties.

IRS Efforts and Congressional Oversight

The GAO report credited the IRS with blocking about $88 billion in potentially fraudulent refunds from 2018 through 2024 through its automated Return Review Program, which screens returns for identity theft and refund fraud. Over the same period, IRS auditors closed more than 4.8 million audits, recommending an average of $24.9 billion in additional tax annually and protecting $3.7 billion a year in revenue from improper refunds. These audit figures include all types of noncompliance, not just fraud.

GAO recommended that IRS managers weigh the cost of new controls against the potential fraud losses prevented. The report was addressed to the Senate Homeland Security and Governmental Affairs Committee and the House Oversight and Government Reform Committee, but not to the congressional tax-writing committees.

GAO said its work was conducted at the initiative of the comptroller general. The agency’s estimates drew on IRS case data and simulations, with the high end of the range reflecting tax evasion in the shadow economy. Each figure represents the outer bound of the middle 90% of values in its respective distribution.