Nearly Half Of IRS Audits Target Poorest Taxpayers, Report Finds

Nearly half of all IRS audits in 2021 targeted the nation’s poorest taxpayers, according to a new study.

A report released by the Transactional Records Access Clearinghouse (TRAC) on Tuesday said that about 307,000 of the nearly 660,000 audits conducted by the IRS in 2021 were among taxpayers who claimed the Earned Income Tax Credit intended for those making the lowest incomes in the nation, those earning less than $25,000 in total gross receipts.

The poorest families in the study were audited at five times the rate of other Americans.

IRS Audits Poorest Families at Five Times the Rate for Everyone Else @TRACReports

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

— Austin Kocher, PhD (@ackocher) March 8, 2022

“Even taxpayers with total positive income from $200,000 to $1,000,000 had only 1/3 the odds of audit compared with these lowest-income wage earners: 4.5 out of every 1,000 compared to 13.0 out of every 1,000 of lowest-income earners,” the study noted.

In 2021, Americans with total positive income $200k to $1M were audited at the rate of 4.5 out of every 1,000.

Americans with less than $25,000 in total gross receipts were audited at a rate of 13.0 out of every 1,000.

Read the report here: https://t.co/UGkGcpjNDc

— TRAC Reports (@TRACReports) March 8, 2022

“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 study asked.

In contrast, far fewer millionaire audits were conducted. “IRS recorded 617,505 millionaire returns filed that were available to be audited in FY 2021. With only 13,725 millionaire audits last year, more than 600,000 millionaire returns were NOT audited,” according to the report.

This meaning of the 660,000 audits in 2021, only 13,725 were among Americans with an income of $1 million or more.

“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),” according to the report.

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 also emphasized that the bias is not new. In a press release highlighting the study, TRAC emphasized, “This unfortunate situation is not new. History is just repeating itself. More than twenty years ago, TRAC similarly reported that ‘low income taxpayers now stand a greater chance of being audited than higher income taxpayers.’”

The Biden administration partially scaled back plans to monitor Americans’ overall bank account transactions, at one point intending to investigate any transaction of $600 or more. The Daily Wire reported:

The Democrats’ pending $3.5 trillion social spending bill originally contained a proposal that would have compelled banks to report gross inflows and outflows in accounts with balances above $600 at any time during the year. After many lawmakers raised concerns over potential violation of the Fourth Amendment — which prohibits unreasonable searches and seizures — Treasury Secretary Janet Yellen announced on Tuesday that the minimum balance would be raised from $600 to $10,000:

Today’s new proposal reflects the Administration’s strong belief that we should zero in on those at the top of the income scale who don’t pay the taxes they owe, while protecting American workers by setting the bank account threshold at $10,000 and providing an exemption for wage earners like teachers and firefighters. We will continue to work with leaders in Congress to enact this important measure to level the playing field for workers and small businesses, and raise revenue to build our economy back better.

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