Newly released reports have revealed that nearly half of all IRS audits conducted in 2021 targeted the poorest taxpayers in the nation.
The Transactional Records Access Clearinghouse (TRAC) released a report on Tuesday finding that out of 659,003 audits performed last year, 306,944 were conducted on lowest income wage earners that claimed the Earned Income Tax Credit, those earning less than $25,000 in total gross receipts.
The report found that these low income families were audited at five times the rate for everyone else.
It noted that those with an income between $200,000 and $1 million had only one third the odds of an audit compared to these low income wage earners.
IRS Audits Poorest Families at Five Times the Rate for Everyone Else @TRACReports
— Austin Kocher, PhD (@ackocher) March 8, 2022
New data show that low-income wage earners with less than $25,000 in total gross receipts are audited at a rate five times higher than for everyone else. ?https://t.co/g5P1Xumdo3 pic.twitter.com/DmC0boZV6L
4.5 out of every 1,000 of these higher income tax filings were audited, compared to 13.1 out of every 1,000 for the lowest income returns.
"Does it make sense from either an equity or revenue standpoint to focus IRS’s limited firepower on the poorest taxpayers among us – those with incomes so low they have filed returns claiming an anti-poverty earned income tax credit? This question alone raises profound issues," the report asked.
In comparison, in 2021, 13,725 audits were issued for those making more than $1 million. This is up from 2020, where 11,331 audits were issued, and down slightly from 2019, were 13,970 were conducted.
With only 13,725 audits being issued to millionaires last year, over 600,000 returns in this bracket were not audited.
During FY 2021 IRS revenue agents and tax examiners audited 13,725 taxpayers reporting $1 million dollars or more in positive income, up from the small numbers audited during FY 2020 (11,331), but still slightly below FY 2019 (13,970).
— Austin Kocher, PhD (@ackocher) March 8, 2022
The study blamed this gap in millionaire audits on a lack of IRS revenue agents.
"A critical limitation in the IRS’s ability to audit millionaires is the availability of IRS revenue agents. Only this class of auditors, given sufficient training and experience, are qualified to examine complex tax returns – the types of returns typically filed by high-income individuals and large-scale businesses," the report stated, which noted that the number of IRS revenue agents has dropped by 41 percent since the end of fiscal year 2010.
"Compliance with tax requirements, especially for those with income not subject to automatic tax withholding, rests in no small part on the public’s belief that they should comply. How long with this belief continue when IRS targets low-income taxpayers because they are simply easier to audit while those with higher incomes escape any examination?" the report concluded.
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