IRS says it will boost audits on wealthy, address racial disparities

(Gray News) - The Internal Revenue Service said it is planning to clamp down on tax cheating among the very wealthy.

The agency says it will increase audits on people who earn more than $10 million from 11% to 16.5% by 2026.

As for businesses, the IRS will triple audit rates for those with assets over $250 million. It will also audit 10 times as many business partnerships with assets over $10 million.

The moves come as audit rates have fallen over the years due to staffing issues at the IRS.

The audit rate of millionaires fell by more than 70% from 2010 to 2019, and the rate on large corporations dropped by more than 50%, the Associated Press report.

The agency has added 11,000 new positions over the past two years, funded by the Inflation Reduction Act, and plans to add 14,000 more by 2029.

As for everyday taxpayers, the agency said there’s no need to worry.

IRS Commissioner Danny Werfel said audit rates on households earning less than $400,000 will not increase from their record low in 2018.

The commissioner also said it’s addressing a disparity in tax audits between Black filers and other taxpayers.

A study from January 2023 involving university researchers and the Treasury Department found that IRS data-driven algorithms selected Black taxpayers for auditing at up to 4.7 times the rate of non-Black taxpayers, the Associated Press reported.

The study said the IRS disproportionately audited people who claim the Earned Income Tax Credit, which is aimed at low- to moderate-income workers and families: While Black taxpayers accounted for 21% of the claims for that break, they were the focus of 43% of the audits concerning the credit.

“We have taken swift initial action to dramatically reduce the number of those audits. We have also made changes to the selection criteria for those audits,” Werfel said.

The discriminatory audits, he told reporters, “degrade trust in our tax system.”

Copyright 2024 Gray Media Group, Inc. All rights reserved. CNN Newsource and The Associated Press contributed to this report.