Sen. Elizabeth Warren (D.Massachusetts), as well as Rep. Judy Chu (D.California), wrote a letter to Tuesday’s Internal Revenue Service (IRS), and Treasury Department. demanded that the agency explainWhy audits of low-income taxpayers doubled in the past year
The letter, addressed to IRS Commissioner Chuck Rettig and Treasury Secretary Janet Yellen, points out that IRS audits of low-income earners doubled in fiscal year 2021 and that the practice of disproportionately auditing this group goes against President Joe Biden’s pledge to not increase tax scrutiny of people making less than $400,000 in income.
The IRS has seen its funding decrease over the years. We are grateful. to RepublicansThe agency has increased its audits of the poorest Americans, particularly those who are eligible for the earned income credit or those earning less than $25,000 per year.
This is largely because it’s less resource intensive for the IRS to examine the finances of low-income taxpayers than to attempt to untangle the assets of the ultra-wealthy. According to lawmakers, this is a worrying trend that reflects the increasing wealth gap. grows ever widerIn the U.S.
“We know the IRS suffers from underfunding, and we are working to secure substantial, permanent funding so the IRS can take on the tax cheating of giant corporations and the ultra-wealthy. But, we also urge you to move swiftly to end the targeting of low-income Americans,” the letter reads. “The most vulnerable taxpayers should not shoulder the burden of insufficient IRS enforcement funding simply because they require fewer resources to audit.”
In a hearing last month, Rettig denied that the poorest Americans were audited at a higher rate, calling the assertion “absolutely 100 percent false.” But the lawmakers point out that the IRS commissioner was relying on old data; more recent data from the last four years tells a different story.
A recent analysisSyracuse University researchers analyzed IRS data and found that low-income households earning less than $25,000 per year were audited at five-folds the rate of all other tax-paying families in fiscal year 2021, and twice the rate for fiscal 2018, when low income earners were 2.5x more likely to be audited. 13 tax returns were audited from individuals earning less than $25,000, while only 2.6 returned from those making more than $25,000 were subject to audit.
The latest statistics from the Internal Revenue Service (IRS), covering federal income tax audits up to February 2022, show that the agency continues to target audits of the lowest wage earners. #IRS
— TRAC Reports (@TRACReports) March 29, 2022
Over half of all audits in FY2021, according to Transactional Records Access Clearinghouse researchers, were conducted on people who are eligible for the earned income credit. The mail-based audits that are more common than face-toface were conducted for 54% of the correspondence audits.
TRAC also pointed out that the way these audits are conducted makes the process particularly unfair and difficult for these taxpayers. The IRS sets up audits of low-income households in order to use the least resources, so audit subjects receive the lowest level customer service. As the IRS has increased its audits of low-income households, this problem has gotten worse. been especially overburdenedDue in part to chronic underfunding and pandemic programs.
Warren and Chu highlight that correspondence audits are not recommended. actually quite resource intensiveThese resources may be required even though they are less burdensome for the agency.
The lawmakers have requested that the Treasury Department investigate ways to strengthen tax compliance for the wealthy and corporations. Senator Warren was elected earlier this year. A Democratic call was ledThe IRS needs more funding as it warned that 2022 could be a difficult year for taxpayers. They called for a minimum increase of 14 percent to the agency’s annual funding as well as an $80 billion investment over the next decade.