WASHINGTON (AP) — The IRS said Thursday it has taken steps to address a wide disparity in audit rates between Black taxpayers and other filers, and is taking a closer look at tax returns. ‘a greater number of wealthy individuals and large companies.
“We are overhauling our compliance efforts to advance our commitment to fair, equitable and efficient tax administration and to hold ourselves accountable to the taxpayers we serve,” according to a report. annual agency update.
A study from January 2023, involving university researchers and the Treasury Department, found that algorithms based on IRS data selected Black taxpayers for audit up to 4.7 times more than non-Black taxpayers. The study says the IRS has disproportionately audited people who claim Earned Income Tax Creditwhich is aimed at low-to-moderate income workers and families: while black taxpayers represented 21% of the reduction requests, they were subject to 43% of the credit audits.
“We have taken rapid initial steps to significantly reduce the number of these audits. We have also changed the selection criteria for these audits,” said IRS Commissioner Daniel Werfel.
Werfel, who was I took the oath a little over a year agohas testified before Congress on the issue and last September he wrote to the Senate Finance Committee that the IRS would make changes.
Discriminatory controls, he told reporters, “degrade confidence in our tax system.”
Werfel and the IRS have tried over the past year to show how money from the Inflation Reduction Act, President Joe Biden’s big bill on climate, health care and taxes, helped modernize the agency and improve services to taxpayers, and that people earning less than $400,000 per person helped modernize the agency and improve services to taxpayers. the year would not be subject to additional audits due to the new funding.
Noting the promise to keep audit rates for people earning $400,000 a year or less at 2018 levels, he said Thursday that “by no means have we exceeded that rate.”
He added: “There is no new wave of audits coming for middle and low income taxpayers – “that is not part of our plans in any way.”
The IRS will focus next year on using the increased funding to conduct higher rates of audits on suspected wealthy tax evaders after collecting hundreds of millions in back taxes this year.
Ensuring that citizens pay their taxes is one of the tax collection agency’s biggest challenges. The audit rate of millionaires fell by more than 70% between 2010 and 2019 and that of large companies by more than 50%.
The IRS plans to increase audit rates for businesses with assets over $250 million to 22.6% in 2026, up from 8.8% for tax year 2019. It also plans to increase audit rates tenfold. audit rates on large, complex partnerships with assets greater than $10 million.
“While the IRS has accomplished much thus far with IRA funding,” he said, “we must do much more to make improvements and transform the IRS in the interest taxpayers.”
