President Joe Biden's new tax enforcement plan would add nearly 87,000 employees to the Internal Revenue Service, make banks report more information to the agency and require stricter cryptocurrency compliance, according to a new Treasury Department report released on Thursday.

Officials said the plan would cut the tax gap by 10% over the next decade. Treasury estimates the plan would raise $700 billion in the first decade and $1.6 trillion in the second decade after enactment.

The report estimates the tax gap was $584 billion in 2019, and is on pace to total $7 trillion over the next decade. The most recent IRS estimate, looking at tax years 2011-2013, had found an annual tax gap of $441 billion — but IRS Commissioner Charles Rettig has said the tax gap could now be as high as $1 trillion.

Treasury officials note the tax gap could be higher than their estimate, which they say is conservative, in part because it's difficult to calculate. The administration argues weak enforcement largely benefits high earners – whose tax evasion contributes to the large tax gap.

In his American Families Plan, Biden called for $80 billion to boost resources at the IRS to ensure wealthy Americans and corporations pay the taxes they owe. The goal would be to use some of the revenue raised to help pay for programs like universal Pre-K, free community college and paid family leave.

The new funding would go toward overhauling outdated technology and hiring additional staff. The Treasury report said the IRS has seen a 20% decline in its workforce since 2010, and the agency now has fewer auditors than any time since World War II. Biden's plan would add nearly 87,000 employees to the IRS – approximately double its current levels – over the next decade.

Treasury estimates the resources could bring in $320 billion in additional revenue over 10 years.

Compliance on 'less visible sources of income'

The second major component of Biden's plan would require financial institutions to report annual account inflows and outflows to the IRS. Treasury officials said the goal would be to highlight "red flags" and would not be burdensome to compliant taxpayers.

"For those people, just to be very clear, the impact of this new world is going to be that they are going to be able to communicate with the IRS effectively and efficiently in a timely manner, which we all know hasn't been the case," said a Treasury official.

Treasury officials say IRS staff needs more resources and training in order to effectively scrutinize complex corporations and the wealthiest taxpayers. "In order for the IRS to appropriately focus enforcement scrutiny on high-income taxpayers and the businesses they own—which research has shown is a primary source of the tax gap—its budget must be replenished. IRS agents cannot simply be assigned to global high wealth, partnership, or large and complex business examinations without the requisite skills, training, and experience to analyze returns that are highly complex," the report said.

Roughly 99% of taxes due on wages are paid to the IRS, but compliance on "less visible sources of income" is estimated to be 45%, according to the report. Officials told reporters they believe the enhanced reporting requirements will spur more voluntary compliance, because taxpayers know the IRS has insight into their accounts.

The administration estimates the new requirements would bring in $460 billion over a decade, though officials warned it would take time for the IRS to figure out how to best use the information.

Treasury is also calling for cryptocurrency transfers worth more than $10,000 to be reported to the IRS, noting that cryptocurrencies pose a tax evasion risk.

"Although cryptocurrency is a small share of current business transactions, such comprehensive reporting is necessary to minimize the incentives and opportunity to shift income out of the new information reporting regime," the report said.

Jessica Smith is chief political correspondent for Yahoo Finance, based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.

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