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OAN’s Brooke Mallory
1:44 PM – Wednesday, April 17, 2024
Following the announcement that the Inflation Reduction Act would provide the IRS with an additional $80 billion in budget, the Biden administration had made an effort to convince American taxpayers that this money would not increase their likelihood of being audited by the agency.
Treasury Secretary Janet Yellen also previously claimed that audit rates would not rise for people and small businesses with annual incomes under $400,000.
In addition, a press release from the White House recently stated that a significant portion of the money is “dedicated to closing the tax gap by specifically enforcing tax compliance by the wealthiest tax evaders.”
“However, data from Syracuse University’s Transactional Records Access Clearinghouse (TRAC), a nonpartisan data provider focused on federal government agencies, shows the poorest Americans — primarily those requesting the Earned Income Credit (EIC) — have a higher risk of getting audited by the IRS,” according to Yahoo News.
According to TRAC’s analysis of 2021 tax returns, those with yearly incomes under $25,000 had a five-fold higher chance of being audited compared to other taxpayers. Furthermore, they discovered that 13% of these returns showed that the EIC receivers were audited, with that number rising to 13.5% in 2022.
In 2022, under 1% or less of millionaires experienced an IRS audit.
“Families with low incomes are relatively easy and inexpensive to audit compared to more wealthy individuals and corporations,” said Joanna Ain, associate director of policy at Prosperity Now, a national nonprofit. “I can imagine a huge and a very scary burden for low-income families to get these notices from the IRS and and to go through that process.”
An average individual taxpayer already has to invest around 13 hours and $240 in out-of-pocket expenses to file a single annual return, according to Taxpayer Advocate. For taxpayers, dealing with an IRS audit may need considerably more time and resources.
Private tax preparation companies have been able to increase their profits by preying on people’s fear of an IRS audit. For instance, H&R Block (NYSE:HRB) charges filers an additional fee known as “Peace of Mind,” which is promoted as a service that offers support and representation in the case of an IRS audit.
Some politicians, like Florida GOP Governor Ron DeSantis (R-Fla.), have gone so far as to advocate for the abolishment of the IRS. Instead, DeSantis says that he would like to enact a single flat tax that eliminates the current tax system and charges all taxpayers the same amount.
“The IRS enforces the tax law in a number of ways. The primary way is through the examination of tax returns that are identified as having the highest potential noncompliance. This identification is determined using risk-based scoring mechanisms, data driven algorithms, third party information, whistleblowers and information provided by the taxpayer. The objective of an examination is to determine if income, expenses and credits are being reported accurately,” according to irs.gov
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