Are you the subject of an IRS audit? The answer for most Americans is no, even for those who earn more than the average American worker. A recent study has shown that audits are more common for the poorest among the poor than for the rest of us. In fact, the rate of auditing for them is five times higher than it is for the majority of the American population.
The Transactional Records Access Clearinghouse (TRAC) reported that 660,000 audits were conducted by the IRS in the last year; 370,000 of those audits targeted taxpayers at the lowest tax brackets, who also claimed the Earned Income Tax Credit, which was meant to provide them with relief and was only available to those earning less than $30,000 per year. This is a five-fold higher audit rate than for any other tax bracket.
In addition, the report noted that more than half of the audits on low-income taxpayers were completed on people with low incomes who had “claimed an anti-poverty earned tax credit to offset tax otherwise due on… gross revenues less than $25,000.”
Taxpayers who earned $200,000 to $1 million last year had only a third of the chance of being audited as those in lower tax brackets. Only 4.5 of every 1,000 returns from wealthy taxpayers were audited, compared to 13 of 1,000 low-income taxpayer returns. The rate drops even further when higher tax brackets are considered. TRAC stated that the “IRS had 617,505 millionaire returns that could be audited in FY 2021.” There were only 13,725 millionaire audits in 2017, so more than 600,000 millionaire returns weren't audited.
This begs the question: Why is this happening in this manner? The IRS is concerned about someone who earns less in a year than a wealthy taxpayer makes in one day or one large transaction?
They don't. It all boils down to laziness, as others have pointed out.
The IRS is required by law to perform so many audits each year. However, not all audits require the same amount of time or effort. Taxpayer returns that contain incomes exceeding $200,000 tend to be more complex than those from lower tax brackets. This means that deeper and more lasting investigations are necessary. Audits of those in lower tax brackets often have fewer deductions or rules that the IRS applies, which makes them more convenient for the tax agency.
According to TRAC, this fact, in addition to the high number of low-income audits, “raises profound questions.” However, the group pointed out that this is not a new concept. TRAC stated that the IRS was performing the same type of disproportionate auditing as it did 20 years ago. There was a greater likelihood then that the IRS would audit the poor than the wealthy.
This isn't the only problem that President Joe Biden's IRS is facing at the moment. Most people will recall that the Biden Administration suggested that the IRS start keeping track of bank accounts and owners holding $10,000 or more within a single year. All transactions exceeding $600 must be reported to the IRS. This was resisted by citizens of all walks of society, forcing it to be almost immediately dropped.
The IRS announced last month that they would launch a new online program in which all users will have to submit biometric and facial-recognition data to gain access to their online accounts. This, too, was quickly canceled, or, at the very least, delayed due to overwhelming opposition.
Biden's IRS, like all his other efforts, is failing miserably. We hope that in November, new leadership will be brought on the scene to force the agency to do its job properly–to start doing it right.