IRS Acknowledges Disparities In Audit Rates For Black Taxpayers

News Americas, NEW YORK, NY, Thurs. May 18, 2023: The Internal Revenue Service (IRS) has admitted that Black taxpayers face higher audit rates compared to what would be expected given their share of the U.S. population. This admission, according to CBS News, follows earlier research findings that revealed Black Americans are up to five times more likely to be audited than taxpayers of other races.

The IRS’s acknowledgment comes in response to calls from lawmakers and policy experts to review its auditing processes after the disparities faced by Black taxpayers came to light. An additional analysis had previously revealed that low-income Americans are five times more likely to be audited, primarily due to the Earned Income Tax Credit (EITC), a benefit intended for low-wage workers but prone to a high rate of erroneous claims.

In a letter to the U.S. Senate, IRS Commissioner Daniel Werfel stated, “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.” Werfel further noted that the IRS plans to use part of its $80 billion funding, allocated through the Inflation Reduction Act, to examine potential systemic bias in compliance strategies and treatments.

Lawmakers responded to Werfel’s admission by calling for changes to address the disparities in audit rates for Black Americans. Representative Bill Pascrell, Jr., a Democrat from New Jersey, took to Twitter, writing, “Back in March, my colleagues and I raised alarms to the new IRS boss about Black taxpayers being over-audited and today he confirmed our suspicions. The IRS is making strides, but extra audits of Black Americans are disgraceful and must end.”

The agency intends to evaluate its processes to identify the source of racial disparities. Although the IRS does not track the race of filers, an earlier study suggested that the higher audit rate for Black taxpayers may be attributed to a flawed artificial intelligence algorithm used by the IRS to select audits. As a result, the IRS is considering changing its criteria for selecting tax returns to be audited. Commissioner Werfel mentioned the possibility of focusing on “broader tax issues” instead of primarily targeting the EITC.