Poor people faced a significantly higher chance in 2022 of being audited by President Joe Biden’s IRS than both rich and middle-class earners, according to a Syracuse University study.
In fact, no group faced as much scrutiny from the IRS as those who made below $25,000, the university’s data-gathering center found. Among families that benefited from the earned income tax credit, a rebate on income and payroll taxes made available to the nation’s poorest families, 1.27 percent were audited. The IRS in 2022 audited just 0.19 percent of the vast majority of taxpayers, meaning the poorest families were at least 550 percent more likely to have the IRS knock on their door than the average filer.
These families were also more likely to receive a regular audit by the IRS than families that reported over $1 million in income, of which just over 1 percent faced regular audits. In total, the IRS audited a total 626,204 taxpayers out of more than 164 million in the 2022 fiscal year. The bulk of those audits were of filers in the lowest income group.
The new data raise questions about the IRS’s auditing strategy as it stands to benefit from $80 billion in new funding that the Biden administration plans to use for new hires. Republicans have alleged that despite White House promises to the contrary, middle-class and poor Americans will face more audits due to the 87,000 new IRS employees the agency plans to hire.
The agency does not publicly disclose its auditing data. Syracuse University’s Transactional Records Access Clearinghouse, a nonpartisan data gathering and distribution organization, went to court to obtain the information through a Freedom of Information Act request. How the IRS decides exactly whom it will audit is largely a mystery.
“Answering this question remains a key challenge that Danny Werfel faces if confirmed as the new IRS commissioner,” the authors of the report write, referring to Biden’s nominee to lead the revenue service. “One of his first orders of business should be lifting this secrecy curtain. He needs to put in its place a full and detailed transparency program to keep the public informed on how these new funds are being applied in the selection of taxpayers for stepped up audits.”
“Republicans have attacked funding for the IRS for years in an effort to protect wealthy tax cheats, who are responsible for $163 billion in tax evasion per year,” a White House spokesman told the Washington Free Beacon. “President Biden’s Inflation Reduction Act, which is only beginning to rebuild enforcement for wealthy Americans, will finally force wealthy tax cheats to pay their fair share while making it easier for working Americans to get their tax refunds.”
The IRS did not respond to a request for comment.
Then-IRS commissioner Charles Rettig testified before Congress last August that the IRS would not increase audits of households earning less than $400,000 if it received the additional funding sought by Biden. Democrats have long claimed that part of the reason the IRS audits poor households so frequently is because it lacks resources to go after wealthy tax cheats, who can afford lawyers and accountants.
“These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans,” Rettig said at the time.
A Congressional Budget Office report last year concluded that the IRS will collect billions of dollars from auditing low- and middle-income Americans, thanks to the new staff funded by the Inflation Reduction Act. The report found that audits of taxpayers making under $400,000 will account for $20 billion in additional revenue.
The IRS has faced accusations, including from its own internal watchdog, that its auditing practices discriminate against low-income earners. The National Taxpayer Service stated in its 2021 annual report that the IRS is focused on sending as many audits as possible rather than customer service.
“Lower-income taxpayers … are not assigned a single point of contact and have a hard time reaching the IRS,” the watchdog’s report said. “The IRS often closes its audits without any contact from the taxpayer. This creates additional downstream consequences for these taxpayers and the IRS.”
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