Explain the term voluntary compliance. How does it differ from the term underground economy? ...

The U.S. income tax system is built on the idea of voluntary compliance, meaning yielding to a request or demand, in this case, the federal government. Compliance is voluntary when taxpayers declare all of their income. Taxpayers also voluntarily comply through obtaining forms and instructions, providing complete and correct information, and filing their income tax returns on time.
When people dont report their earnings, they are participating in an underground economy. Examples of an underground economy include illegal activities such as gambling and legal activities such as yard work or baby-sitting. Because these types of income are often unreported, they are not taxed.