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Are Black people more vulnerable to tax audits because of race?

On Behalf of | May 26, 2023 | Blog, Tax Debt |

Most Washington State residents work hard to fill out their tax forms properly and pay what they owe on time. The Internal Revenue Service will sometimes conduct tax audits to address irregularities. Audits are supposed to be done objectively. However, it was recently revealed that the IRS might be using racial biases when deciding who to audit with Black people a primary target.

Researchers find disproportionate number of Black people are being audited

As part of an investigation into inequities, the IRS found that Black people are being disproportionally singled out for audits. The IRS has informed federal lawmakers of this issue. It is reviewing how and why this is happening with plans to adjust its algorithms accordingly.

The agency assessed the matter after researchers from several prominent universities conducted studies regarding tax audits and racial disparities. The studies found that Black people have five times the chance of facing a federal audit.

The source is believed to be tax credits given to lower-income people, specifically the Earned Income Tax Credit (EITC). Tax law is meant to be fair to everyone. As this information shows, it may be pursuing vulnerable people based on questionable factors.

Individuals and businesses may need guidance with their taxes

Whether it is an individual or a business, it is important not to enter the audit process alone. The IRS is aggressive in its collection efforts and these studies suggest it is pursuing people based on race rather than evenhanded analysis.

Audits can be correspondence examinations through the mail; office examinations as the taxpayer is interviewed in person; or field examinations where the agents will visit the taxpayer and conduct a thorough review of their books and records.

Black people who are simply trying to make ends meet and are using available programs like EITC to do so are being increasingly confronted by a more difficult road when they are audited. Audits can stoke fear as to what might occur in the future. It can be financially and personally costly. People who are in this situation should know their rights and have help.