Black taxpayers are more likely to have an IRS audit
IRS Commissioner Danny Werfel speaks at a Senate Finance Committee hearing on April 19, 2023 in Washington, DC
Al Drago | Bloomberg | Getty Images
The IRS said Monday that black taxpayers are significantly more likely to face an IRS scrutiny, confirming recent findings. said IRS Commissioner Daniel Werfel The agency is considering changes to eliminate the inequality.
A study published in January Economists from Stanford University, the University of Michigan, the US Treasury Department and the University of Chicago found that the IRS audits screen black taxpayers about three to five times more often than other Americans. The researchers based their assessment on microdata from around 148 million tax returns and 780,000 tax audits.
These results raised questions from lawmakers about Werfel’s nomination process.
“Although more research is needed, our initial results support the conclusion that black taxpayers may be subject to higher rates than would be expected given their percentage of the population,” Werfel wrote in a letter dated May 15 to the Senate Finance Committee.
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Werfel said the IRS has committed “significant resources” to addressing the disparity, including a closer look at the agency’s automated processes and data used for exam selection.
In particular, he vowed to study algorithms for examining applicants who claim to be Earned Income Tax Creditor EITC, a tax break for low- to middle-income workers. The EITC is subject to more scrutiny because it is refundable, meaning it will still issue a refund even if the credit value exceeds the taxes owed. Werfel emphasized that the IRS does not and will not consider race as part of the exam selection process, but the original research suggests that the EITC contributed to the disparity.
Werfel added, “I will continue to focus on this to ensure we identify and implement changes ahead of next tax filing season.”
Senate Finance Committee Chairman Ron Wyden, D-Ore., said the findings are a “shameful consequence” of racial discrimination often expressed in algorithms used by governments and private organizations. “This bias is totally unacceptable anywhere it occurs and we have a duty to eradicate it,” he said in an opinion On Monday.
Wyden said the past decade of IRS budget cuts has made it “virtually impossible to enforce our tax laws fairly,” leading to an “over-reliance on these buggy algorithms.”
Last August, Congress approved nearly $80 billion in funding from the IRS. The aim was to close the tax gap by initially focusing on the tax returns of wealthy families, large corporations and complex partnerships.
https://www.cnbc.com/2023/05/16/black-taxpayers-are-more-likely-to-face-an-irs-audit.html Black taxpayers are more likely to have an IRS audit