On Thursday, the Internal Revenue Service (IRS) announced that it has implemented measures to tackle the significant discrepancy in audit rates between Black taxpayers and other filers.
Report: IRS Audit Bias Against Black Taxpayers
In a study conducted in January 2023, university researchers and the Treasury Department discovered that IRS data-driven algorithms exhibited a significantly higher rate of selecting Black taxpayers for auditing compared to non-Black taxpayers.
Based on the study, individuals who claim the Earned Income Tax Credit, designed to assist low to moderate income workers and families, were audited by the IRS at a higher rate.
Although Black taxpayers made up 21% of the claims for that break, they were disproportionately targeted with 43% of the audits related to the credit.
"We have quickly implemented measures to significantly decrease the number of those audits," stated IRS Commissioner Daniel Werfel, according to Fortune.
Werfel, who took office just over a year ago, has provided testimony to Congress regarding the matter and sent a letter to the Senate Finance Committee in September, expressing the IRS's commitment to implementing necessary changes.
IRS Boosts Audits on High Earners, Companies
ABC7 Chicago reported that the IRS plans to utilize the increased funding to carry out more audits on individuals suspected of evading taxes, particularly those with higher incomes.
This comes after a successful year of collecting hundreds of millions of dollars in back taxes. Ensuring compliance with tax obligations remains a significant challenge for the tax collection agency.
From 2010 to 2019, there was a significant decrease in the audit rate for millionaires, with a drop of over 70%. Similarly, the audit rate for large corporations also experienced a decline of more than 50%.
In 2026, the IRS intends to significantly increase audit rates for companies with assets exceeding $250 million. The rate is expected to rise to 22.6%, a substantial increase from the 8.8% rate observed in the tax year 2019.
In addition, there are plans to significantly increase audit rates for large complex partnerships with assets over $10 million.
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