The Internal Revenue Service is making progress on devising a strategy to narrow the tax gap, but significant challenges remain, according to a new report by the Treasury Department's inspector general.

The tax gap, the difference between what taxpayers are supposed to pay and what is actually paid, is estimated to be about $345 billion. At 83.7 percent, the United States has one of the highest tax compliance rates in the world, but each percentage point of noncompliance costs the federal government approximately $21 billion in lost revenue.

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