The IRS has announced significant steps to address the disparity in audit rates between Black taxpayers and others, as well as to increase scrutiny on wealthy individuals and major corporations. In an effort to promote fair and equitable tax administration, the agency is revamping its compliance efforts and holding itself accountable to the taxpayers it serves.
A recent study conducted in January 2023 revealed that Black taxpayers were audited at a rate up to 4.7 times higher than non-Black taxpayers. The IRS was found to disproportionately target individuals claiming the Earned Income Tax Credit, with Black taxpayers comprising 21% of claims but facing 43% of audits related to the credit.
IRS Commissioner Daniel Werfel emphasized the agency's commitment to reducing discriminatory audits and revising selection criteria for audits. Werfel highlighted the negative impact of such audits on public trust in the tax system.
Werfel assured that individuals earning less than $400,000 annually would not face increased audit rates due to the Inflation Reduction Act. The IRS aims to maintain audit rates for this income bracket at 2018 levels and has no plans to intensify audits for middle and low-income taxpayers.
Looking ahead, the IRS plans to leverage additional funding to target suspected wealthy tax evaders and enhance tax compliance. Audit rates for millionaires and large corporations had significantly declined in recent years, prompting the agency to increase scrutiny on companies with assets exceeding $250 million and large complex partnerships with assets over $10 million.
While acknowledging the progress made with the Inflation Reduction Act funding, Werfel emphasized the need for further improvements to transform the IRS for the benefit of taxpayers.
