TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, April 25, 2019

ProPublica: Lawmakers Confront The IRS Over Tax Audits That Target The Poor

Pro PublicaProPublica, Lawmakers Just Confronted the IRS Over Tax Audits That Target the Poor:

Over the past six months, ProPublica has detailed the myriad ways the IRS has been gutted and how that has impacted its ability to do its job. In sum: The wealthy escape scrutiny while the working poor, an easier target, are audited at high rates.

This week, Congress, in two separate hearings, confronted IRS Commissioner Charles Rettig with the findings.

“How can the Congress stand by a tax-enforcement system that punishes working people and gives the wealthy a green light to cheat?” asked Sen. Ron Wyden, D-Ore., ranking member of the Senate Finance Committee, during his opening statement on Wednesday.

Wyden was referring to a ProPublica investigation last week into the fate of the elite unit the IRS formed to keep up with the complicated tax-avoidance schemes of the wealthy. Faced with staff cuts and blowback from the wealthy and their tax representatives, the effort fumbled and was scaled way back.

Wyden demanded that Rettig produce a plan within 30 days on how his agency will change a system that is “stacked in favor of the wealthy” and “against the most vulnerable.” Rettig promised to do so.

One day earlier, at a hearing before the House Appropriations Committee, Rettig was also questioned about a map showing where in the country IRS audits are most concentrated. The top five most audited counties, ProPublica found, were rural, mostly African American ones in the Deep South. (On Wednesday, Wyden called the map “shameful.”)

Rep. Charlie Crist, D-Fla., displayed the map during the hearing and asked: “The map looks like the IRS is targeting black, Hispanic and Native American populations for audit. Is that the case?”

Rettig said that it wasn’t, adding that the IRS did not screen for race when selecting returns for audit.

But Crist said the findings amounted to “disparate impact,” the idea that even if unintentional, systems can produce “racial discrimination in practice.” He asked how the IRS would avoid “implicit or explicit” bias going forward.

 

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Comments

Let me hazard a guess that the audits of the poor are in regard to the EITC, one of the most abused aspects of our tax/social welfare system. When I used to prepare returns for average people, the amount of attempted fraud in this area was astounding.
But these are relatively easy things to check with a little investigation into social security numbers of "dependents." Not a huge time sink for a stressed agency. The bottom line is that all audits are not created equal. Wyden should quit trying to assist tax fraud by "little guys", and spend more time overseeing his crony financial and tech industry buddies/campaign contributors.

Posted by: ruralcounsel | Apr 25, 2019 4:01:26 AM

Here's a solution- eliminate the Earned Income Tax Credit and that will reduce the huge amount of fraud it attracts. That is what is driving these stats.

Posted by: Smitty | Apr 25, 2019 7:56:53 AM

The easiest way to eliminate the EITC but achieve almost the same result is to quit collecting payroll taxes on the first x dollars of earned income. Tune x to be revenue neutral, and quit trying to make it a function of number of dependents.

Posted by: ruralcounsel | Apr 26, 2019 3:53:27 AM

It’s ironic that the congress that created the EITC (which we all know is the source of the heat map results) is blaming the IRS for enforcing it. The IRS uses a formulaic approach for its audits, so if minority areas are getting audited more often that’s most likely because they’re engaging in more high risk tax positions.

Posted by: JustMe | Apr 26, 2019 4:17:03 AM

Both rural and Smitty nailed it. This is nothing more than political hypocrisy. If you have ever worked VITA, you know the EITC makes the FTC look simple. Tax Expenditures need to go. If Congress wants to give away money, it needs to do so through the front door, not in the back alley of the Tax Code.

Posted by: Dale Spradling | Apr 26, 2019 5:15:59 AM