The Greene County Democrat

Tag: Earned Income Tax Credit (EITC)

  • Newswire: IRS admits targeting Black taxpayers for audits

     Internal Revenue Service building in Washington, D. C.

    By Stacy M. Brown, NNPA Newswire Senior National Correspondent


    IRS Commissioner Daniel Werfel has acknowledged what many have known for some time: Black taxpayers face an IRS audit exponentially more than other groups.
Werfel acknowledged the disparity in a letter this week in which he responded to a request for information about the “apparent racial disparity” in selecting tax returns for audit, along with a plan to address the issue.
    
“Let me start by stressing that the IRS is committed to enforcing tax laws in a fair and impartial manner,” Werfel said in the letter addressed to the U.S. Senate.
“When evidence of unfair treatment is presented, we must take immediate action to address it. It is also important to reiterate that we do not and will not consider race as part of our case selection and audit processes.”
    
He continued: “Nevertheless, a recent study estimated, using imputed race values, that Black taxpayers are audited at three to five times the rate of non-Black taxpayers. “The research further suggests that most of this disparity is driven by differences in correspondence audit rates among taxpayers claiming the Earned Income Tax Credit (EITC).
    
“We are deeply concerned by these findings and committed to doing the work to understand and address any disparate impact of the actions we take.”
    
Werfel noted that as soon as Congress confirmed his appointment, he met with an IRS team that had already studied the issue of race discrimination in audits. He noted that the research has continued as authorities try to pinpoint what drives the disparity and how to fix the issue.
    
Researchers discovered that Black taxpayers are five times more likely to face an audit when filing federal returns than any other race.
    
When President Biden signed the Inflation Reduction Act, the IRS received $80 billion, which the agency pledged to use to determine a better system to eliminate such discrimination.
    
“Back in March, my colleagues and I raised alarms with the new IRS boss about Black taxpayers being over-audited, and today he confirmed our suspicions,” tweeted Rep. Bill Pascrell, Jr. (D-N.J.). “The IRS is making strides, but extra audits of Black Americans are disgraceful and must end.”
    
Werfel promised that the IRS would accelerate an existing research effort to detect and ensure compliance among “ghost preparers,” individuals who are paid to prepare returns for others but do not identify themselves to the IRS.
    
“Initial evidence confirms that unscrupulous and ghost preparers disproportionately prepare returns in minority communities,” Werfel noted.
“We are making broad efforts to advance our commitment to fair and equitable tax administration and evaluating the best ways to address bias within our audit program.”

  • Newswire : Black taxpayers are audited at twice the rate of other people

    Special to the Trice Edney News Wire from BlackMansStreet.Today
    (TriceEdneyWire.com) – Black men who are raising their children alone are more likely to be audited by the Internal Revenue Service if they use the Earned Income Tax Credit (EITC), compared with married couples of another race who also use EITC, according to a study conducted by the Stanford Institute for Economic Policy Research.
    The EITC supports low-and middle-income with taxable earnings from work, replacing welfare as the largest cash-based safety net program in the United States.
    The IRS, which collects $4 trillion to support government programs, relies on audits to detect underreporting tax liabilities and verify that taxpayers qualify for the benefits they claim.
    The Stanford study reported that Black taxpayers were audited between 2.9 to 4.7 times the rate of non-Black taxpayers.
    EITC causes a high rate of audits involving Black taxpayers versus non-Black taxpayers. Black taxpayers accounted for 21 percent of EITC claims, but they were the focus of 43 percent of EITC audits.
    Stanford RegLab teams work with the Treasury Department, which allows them to analyze more than 148 million tax returns and approximately 780,000 audits.
    When President Biden took office, he signed Racial Justice Executive Order 13985, which requires all federal agencies to determine how their programs impact racial and ethnic equity.
    The discrepancy boggles the mind, although tax returns don’t ask for the taxpayer’s racial or ethnic identity. So, the IRS uses first names, last names, and the locations where many Black people live.
    The most striking statistic affecting Blacks and the IRS is that a single Black man with dependents who uses EITC is 20 times more likely to be audited compared to a non-Black, married couple that jointly filed a taxpayer claiming EITC.
    “The racial disparity in audit rates persists regardless of whether EITC claimants are male or female, married or unmarried or raising children or are childless,” the study noted.
    When Black men report a taxable income of 7.73 percent  with EITC, they are more likely to be audited by the IRS compared with 3.46 percent for married non-Blacks couples, according to the study.
    For single Black male taxpayers who did not claim dependents, they are audited at 5.66 percent versus 2 percent for a non-Black single adult.
    Seventy percent of IRS audits happen through the mail, and 50 percent involve EITC claimants.
    The IRS supposedly uses a colorblind method in which Black taxpayers are audited at much higher rates than non-Black taxpayers who use the use EITC.
    The burden of correspondence audits on EITC claimants is more likely to fall on lower-income taxpayers whose tax returns are less complex and less likely to lead to litigation.
    President Biden’s executive order is intended to make the IRS audit selection algorithm more just. Racial disparities in income are well known, and what the IRS chooses to focus on has big implications for whether audits complement, or undercut a progressive tax system, said Daniel E. Ho of Stanford University.