Tax evasion at the top of the income distribution

We study tax evasion at the top of the U.S. income distribution using micro-data from audits and enforcement initiatives. Leveraging enforcement that revealed noncompliance, we find that recent individual random audit data fail to capture sophisticated evasion via offshore accounts and pass-through businesses. Consequently, estimates based solely on these data under-state evasion by the highest-income Americans. We construct new distributional estimates of US noncompliance. Circa 2006–2013, accounting for sophisticated evasion (holding estimated non-sophisticated evasion fixed) increases the share of unreported income belonging to the top 1% of the distribution by 9 to 33 percentage points.