IRS under fire for increased audits of low-income taxpayers

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The Internal Revenue Service has come under criticism from lawmakers complaining about the agency’s disproportionate number of tax audits of low-income taxpayers who claim the Earned Income Tax Credit and other refundable tax credits, as opposed to higher-income taxpayers.

A recent series of articles in ProPublica found that EITC recipients, who on average tend to make less than $20,000 a year, are more likely to be audited than a taxpayer who earns over $400,000 a year, according to IRS statistics. “In 2017, EITC recipients were audited at twice the rate of taxpayers with income between $200,000 and $500,000,” ProPublica reported in December. “Only households with income above $1 million were examined at significantly higher rates.”

More recently, the site reported that Humphreys County, Mississippi, where more than one-third of the residents falls below the poverty line, is the most heavily audited county in the U.S. The median household annual income there is $26,000.

Taxpayers in Maine and Alabama are also being hit with a disproportionate number of IRS audits, and lawmakers there are complaining. Sen. Angus King, I-Maine, sent a letter Monday to top officials at the IRS citing the finding that residents of Piscataquis and Washington Counties, Maine are audited at a higher rate than residents of counties with much higher median household incomes.

“I write to express my concern regarding the disproportionate number of tax audits that occur in two of Maine’s most disadvantaged counties,” King wrote to IRS commissioner Charles Rettig and IRS deputy commissioner for services and enforcement Kirsten Wielobob. “I urge you to refocus the IRS’s all-too-scarce resources on auditing people with known rates of high tax noncompliance, and away from the people, including many in my state, who are most harmed by the audit process. The IRS’s misdirected audits of lower-income Americans have led to higher-than-average audit rates in two of Maine’s most underprivileged counties. In 2017, citizens of Piscataquis County, Maine earned a median household income of just $38,797. Their neighbors in Washington County earned a median household income of $40,328. These hardworking Mainers were audited nearly 10 percent more frequently than people who live in Sonoma County, California, where the median household income is $71,769.”

Sen. Doug Jones, D-Ala., also wrote to complain. “To take such a large portion of limited IRS resources and to focus them so intensely on rural communities in Alabama and the Southeast makes little fiscal sense,” he wrote in a letter last week to Rettig. “Moreover, the practice appears to be blatantly discriminatory.”

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Tax audits EITC Tax credits Charles "Chuck" Rettig IRS