A study found that Black taxpayers are three times more likely to be audited by the International Revenue Service (IRS) than other racial groups.
The study's authors said that the algorithms used by the IRS to select people to be audited are responsible for the disproportionate rate of audits on Black Americans, given that individual tax enforcement agents do not know the race of the people they are auditing.
- The IRS became more reliant on algorithmic tools over the past decade due to funding cuts and high agent turnover.
- Algorithms disproportionately flag tax returns that have potential errors in the way that they claim tax credits like the earned-income tax credit (EITC), which is used by low-income workers to supplement their income.
- The study found that Black people are 3-5x more likely to be audited than other taxpayers who also claim the EITC.
- The IRS is less likely to audit tax returns that include business income, and Black taxpayers are less likely than other groups to report business income, the study found.
- The researchers concluded that the IRS, by focusing on tax audits that are easier to conduct, has created a system in which Black taxpayers are disproportionately audited.
