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Black Americans are about three to five times more likely Face the IRS Audit compared to other taxpayers, according to a new study,
Although there is no evidence of explicit discrimination from the IRS or its revenue agents, the findings suggest that the disparity stems from a faulty software algorithm used by the agency to make selections. audited,
Based on microdata on nearly 148 million tax returns and 780,000 audits, the study was conducted by economists from Stanford University, the University of Michigan, the US Treasury Department and the University of Chicago.
A Treasury Department spokesperson told CNBC, “Equitable enforcement of our tax laws is a top priority for the administration, and the resources provided by the Inflation Reduction Act allow the IRS to upgrade technology and hire top talent to go after wealthy tax evaders.” Will enable.” E-mail.
Focus on ‘low dollar, high certainty matters’
Study co-author Evelyn Smith, an economics graduate student at the University of Michigan and visiting fellow at Stanford University’s RegLab, said the audit rate difference appears to be driven by the agency’s focus on “low-dollar, high-certainty cases.” ,
Specifically, the study examines audits of claim filers. earned income tax creditTax exemption for low to moderate earners. credit is refundableWhich means eligible filers can get it with zero taxes as well.
The findings suggest that black filers claiming the earned income tax credit are more likely to be audited than non-black filers claiming the same credit.
“It’s a type of audit that the IRS does a lot,” she said. “It’s cheap, easy to perform and black taxpayers get caught up in that disparity relative to non-black taxpayers.”
The focus on these individual-level issues rather than the overall dollar amount of underreporting is driving these differences.
Evelyn Smith
study co-author
Smith said the IRS has focused on specific mistakes with claiming the Earned Income Tax Credit, such as missing dependents or misreporting income, that are required for eligibility.
“It seems to be driving these differences rather than focusing on individual-level issues,” he said, noting the change to self-employed Earned Income Tax Credit filers would help address the problem. .
Cuts create ‘distorted priority of audit’
comes between studies ongoing debate Almost $80 billion in IRS fundingApproved by Congress in August, including enforcement.
Chuck Marr, vice president for federal tax policy at the Center on Budget and Policy Priorities, said the findings were “very troubling” and speaks to the need for staffing the agency. “Budget cuts over the past decade have led to the collapse of the Enforcement Division,” he said. “And one result of that has been this perverted prioritization of audits.”
The IRS is expected to give the Treasury Secretary a plan for the allocation of funds. Janet Yellen in February.