Report Finds Blacks Audited Three to Five times More than Non-Black taxpayers


In January, a Stanford collaboration with the Department of the Treasury found that despite its supposed race-blind selection, Black taxpayers receive IRS audit notices at least 2.9 times (and up to 4.7 times) more often than non-Black taxpayers. Last month, the IRS had to answer to lawmakers on the disparity.  In a letter to the senate, IRS Commissioner Daniel Werfel wrote, “While there is a need for further research, our initial findings support the conclusion that Black taxpayers may be audited at higher rates than would be expected given their share of the population. We are dedicating significant resources to quickly evaluating the extent to which IRS’s exam priorities and automated processes, and the data available to the IRS for use in exam selection, contribute to this disparity. As part of this work, we are evaluating the potential impact of methodological changes to case selection (e.g., optimizing on broader tax issues rather than focusing on EITC overclaims). As this work progresses, additional information will be shared externally regarding the research findings and the appropriate corrective actions IRS will take.”The study found that the largest disparity between the groups was among those claiming the earned income tax credit (EITC), which helps low- to moderate-income workers and families get a tax break, according to the IRS. The EITC is one of the country’s largest anti-poverty programs. But the IRS estimates that of the more than $70 billion paid out last year through the program, $18 billion was claimed improperly.  For the audit study, researchers analyzed data from about 148 million tax returns and 780,000 audits.The top five most audited counties were found to be rural, mostly African American ones in the Deep South.  Werfel stressed that he had been deeply concerned by the findings.  “When evidence of unfair treatment is presented, we must take immediate actions to address it,” Werfel continued. It is also important to reiterate that we do not and will not consider race as part of our case selection and audit processes. As soon as I was confirmed, I met with the IRS team that has been studying this issue. Their research is ongoing and additional time is needed to yield a robust understanding of the drivers of this disparity and to thoroughly evaluate the right potential programmatic changes to address it.”Werfel hopes to identify and implement changes prior to next tax filing season, stating: “We are making broad efforts to advance our commitment to fair and equitable tax administration and evaluating the best ways to address bias within our audit program.”
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