Mar 16, 2022, 18:15 pm
Data from the Transactional Records Access Clearinghouse (TRAC) at Syracuse University shows the IRS audited the lowest-income Americans—"wage earners with less than $25,000 in total gross receipts"—at five times the rate of everyone else during government fiscal year 2021.
"A large increase in federal income tax audits targeting the poorest wage earners allowed the Internal Revenue Service to keep overall audit numbers from further declines for Americans as a whole," TRAC reports.
It's another sign that the Biden administration's plan to beef up IRS funding, hire more than 80,000 new tax cops, and increase monitoring of cash flow into and out of bank accounts could harm the Americans who are just barely scraping by, not only ultra-wealthy tax cheats, as officials say.
In 2021, the IRS conducted 306,944 audits of the lowest-income earners and 352,059 audits of people of all other income levels, according to TRAC. Just 39,449 audits were of people with taxable incomes between $200,000 and $1 million per year.
Put another way, high-income earners had one-third the odds of an audit compared with their low-income counterparts. Only 4.5 out of every 1,000 returns of the $200,000-to-$1 million bracket were audited, compared to 13 out of every 1,000 returns of the lowest-income bracket.
The audit rate for all earners with positive incomes over $25,000 was just 2.6 per 1,000 returns.
"IRS accomplished over 650 thousand audits last year by jacking up its already high reliance on so called 'correspondence audits'—essentially a letter from the IRS asking for documentation on a specific line item on a return," notes TRAC. And "over half of these correspondence audits were targeted at the small proportion of workers with incomes so low they had claimed an anti-poverty earned tax credit to offset the tax otherwise due on their modest earned income."
Fifty-four percent of correspondence audits were aimed at "the small proportion of returns with gross receipts of less than $25,000 claiming an earned income tax credit."
"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?" TRAC asks. "This question alone raises profound issues.
https://reason.com/2022/03/15/lowest-inc...e-audited/
"A large increase in federal income tax audits targeting the poorest wage earners allowed the Internal Revenue Service to keep overall audit numbers from further declines for Americans as a whole," TRAC reports.
It's another sign that the Biden administration's plan to beef up IRS funding, hire more than 80,000 new tax cops, and increase monitoring of cash flow into and out of bank accounts could harm the Americans who are just barely scraping by, not only ultra-wealthy tax cheats, as officials say.
In 2021, the IRS conducted 306,944 audits of the lowest-income earners and 352,059 audits of people of all other income levels, according to TRAC. Just 39,449 audits were of people with taxable incomes between $200,000 and $1 million per year.
Put another way, high-income earners had one-third the odds of an audit compared with their low-income counterparts. Only 4.5 out of every 1,000 returns of the $200,000-to-$1 million bracket were audited, compared to 13 out of every 1,000 returns of the lowest-income bracket.
The audit rate for all earners with positive incomes over $25,000 was just 2.6 per 1,000 returns.
"IRS accomplished over 650 thousand audits last year by jacking up its already high reliance on so called 'correspondence audits'—essentially a letter from the IRS asking for documentation on a specific line item on a return," notes TRAC. And "over half of these correspondence audits were targeted at the small proportion of workers with incomes so low they had claimed an anti-poverty earned tax credit to offset the tax otherwise due on their modest earned income."
Fifty-four percent of correspondence audits were aimed at "the small proportion of returns with gross receipts of less than $25,000 claiming an earned income tax credit."
"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?" TRAC asks. "This question alone raises profound issues.
https://reason.com/2022/03/15/lowest-inc...e-audited/