Tuesday, March 14, 2023
New Evidence On Racial Disparities In IRS Audit Selection Calls For Immediate Action
Kathleen Bryant (NYU Tax Law Center) & Chye-Ching Huang (NYU Tax Law Center), New Evidence on Racial Disparities in IRS Audit Selection Calls for Immediate Action:
A recent working paper has found that although the Internal Revenue Service (IRS)’s audit selection processes are ostensibly “race-blind,” Black tax filers are 2.9 to 4.7 times as likely to be audited by the IRS as non-Black tax filers. Our report summarizes the paper’s conclusions, explains what we do and do not know about the causes of these disparities, and outlines next steps for policymakers to address racial disparities in audit selection.
These steps include modifying the IRS’s confidential audit selection algorithms, reporting publicly and regularly on the causes of audit disparities, removing imbalanced reporting requirements that place far more attention on refundable tax credits than on much larger sources of tax non-compliance, improving the correspondence audit process, and investing in further research. Such actions are needed for the Biden Administration to deliver on IRS Commissioner Nominee Daniel Werfel’s commitment to release a report on racial audit disparities within his first 60 days in office, and the Biden Administration’s February 16th Executive Order directing federal agencies to “prevent and remedy discrimination, including by protecting the public from algorithmic discrimination.”