The Tax Information Gap at the Top

56 Pages Posted: 29 Apr 2022 Last revised: 6 Oct 2022

Date Written: April 25, 2022


Tax information reporting is an essential element of tax administration and compliance the United States. When individuals earn wages, accrue interest, or receive Social Security benefits, the Internal Revenue Service almost always knows. In these situations, a third party, such as an employer or a bank, files an information return with both the individual taxpayer and the IRS. Not surprisingly, when income is subject to tax information reporting, tax compliance is extremely high. Despite the power of tax information reporting to maximize the IRS’s ability to collect taxes owed, these rules also contain significant gaps where limited or no information reporting is required. Often the beneficiaries are high-income and wealthy taxpayers (high-end taxpayers) who earn their income in situations where no third party files information reports with the IRS. Meanwhile, most wage earners are subject to tax information reporting by their employers.

This Article offers a new theory for why the U.S. tax information reporting regime treats high-end taxpayers differently from other taxpayers and offers recommendations for closing gaps in the current rules. The Article shows that the government’s approach to tax information reporting applies almost exclusively to specific activities, such as certain methods of earning income or designated transactions. This approach is consistent with the government’s design of other tax procedure rules that apply to specific types of activities, such as the use of tax shelters, offshore bank accounts, and non-economic substance transactions to avoid tax liability.

This Article argues that the activity-based approach to information reporting often allows high-end taxpayers to engage in tax noncompliance while other taxpayers face significant automatic IRS scrutiny. After presenting this claim, the Article proposes that the policymakers should supplement current law by introducing actor-based information reporting rules that apply once taxpayers’ income or wealth exceeds threshold amounts. Finally, the Article introduces a hybrid first- and third-party approach to information reporting, which accounts for both actor and activity-based criteria, to help close the tax information gap at the top.

Keywords: Tax Shelter, Disclosure, IRS, Audit, Progressivity, Tax Noncompliance, Tax Avoidance, Means-based adjustments, Deterrence, Tax Information Reporting, Inequality, Third-Party Information Reporting, Information Returns

JEL Classification: H20, H23, H24, H25, H26, H29, K23, K34, K42

Suggested Citation

Blank, Joshua D. and Glogower, Ari, The Tax Information Gap at the Top (April 25, 2022). Iowa Law Review, 2023 Forthcoming, UC Irvine School of Law Research Paper No. 2022-14, Northwestern Public Law Research Paper No. 22-30, Northwestern Law & Econ Research Paper No. 22-14, Available at SSRN: or

Joshua D. Blank (Contact Author)

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States


Ari Glogower

Northwestern Pritzker School of Law ( email )

750 N. Lake Shore Drive
Chicago, IL 60611
United States

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