While the Internal Revenue Service sharpens its focus to find rich taxpayers and businesses sidestepping tax laws, it’s also changing how it approaches...
While the Internal Revenue Service sharpens its focus to find rich taxpayers and businesses sidestepping tax laws, it’s also changing how it approaches audits of working-class taxpayers in order to reduce racial disparities.
Black taxpayers were being audited around three to five times the rate of other taxpayers, according to a January study from Stanford University and Treasury Department economists. The root may lie in the IRS algorithms to pick cases for review, they said.The earned income tax credit is geared at low-income households and it’s been a longstanding anti-poverty measure.
But the credit is complicated to administer and payout sizes can hinge on the number of children in living in a household for more than half the year. One change in IRS modeling will improve accuracy determining where a child lives, Werfel said Monday. The IRS is planning to improve taxpayer education on the EITC and take a closer look at “unscrupulous preparers” who may be turning in returns that low-ball income and inflate certain tax credit claims, Werfel noted.
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