As IRS Expands, Study Shows The Agency Audits Black People At Least Thrice As Much As Other Racial Groups 

A new study shows that black can be a good choice for your skin. Tax Filers are three times more likely that they will be audited. IRS The agency is expected to double its staff and to receive an influx of funds to expand audit activity.

Stanford University law professor Daniel Ho partnered with other researchers, as well as economists in the Treasury Department’s Office of Tax Analysis, to examine more than 148 million tax returns. The team was able, based on geography and the first and last names of the filers, to predict whether a particular one would identify themselves as black. The Research The results showed that audits are more common for black filers than those of non-black filers.

“The IRS should drill down to understand and modify its existing audit selection methods to mitigate the disparity we’ve documented,” Ho said in a Press release. “And we’ve shown they can do that without necessarily sacrificing tax revenue.”

The agency’s audits have adisproportionate impact on taxpayers who receive the Earned income Tax Credit, which provides tax breaks for households with low or moderate incomes. The audits of the EITC impacted 43% of black filers, who accounted for 21% percent of EITC claimants.

The IRS conducts a correspondence audit on EITC claimants. This is a more efficient method of conducting audits than field audits, which require the IRS to use greater resources. The agency receives information from a “completely secret” algorithm to automatically generate audit letters for EITC claimants using information from the Dependent Databank.

“Compared with labor-intensive field audits, correspondence audits of EITC claimants are easy to trigger, cost very little, and require minimal effort by IRS personnel,” The news release was continued. “The burden of correspondence audits on EITC claimants is more likely to fall on lower income individuals whose tax returns are less complex and less likely to lead to litigation.”

Researchers found that audits were more likely to have been given to non-black filers than black filers because of the underreported income. Evelyn Smith, a doctoral student at the University of Michigan, assisted with the research. “the choice to focus on whether there is underreporting, as opposed to magnitude of underreporting, is connected to broader structural sources of economic inequality and racial justice.”

The study is being done by the IRS as it prepares to determine whether the disparity between audit rates and other factors. Expand operations using $80 billion provided by President Joe Biden’s Inflation Reduction Act. The Treasury Inspector General for Tax Administration recently noted that the agency’s budget for enforcement activity will increase 69% over the next decade, while the budget for taxpayer services will increase 9%.

Janet Yellen, Treasury Secretary, has vowed not to use the resources to raise audit rates for American households with less than $400,000 per annum “relative to historical levels.” She failed To clarify: “historical levels” Enforcement was much higher than it was a decade ago. Audit rates for Americans with incomes between $25,000-$200,000 fell 76% between 2010 & 2019, according to the. Data The Government Accountability Office.