A review of IRS tax audit data from 2022 revealed that taxpayers in the lowest income band are five times more likely to be audited than those in the highest income bracket.
Tax Reports
During an annual report to Congress, National Taxpayer Advocate Erin M. Collins stated that the IRS correspondence audit process is structured to use the least amount of resources to conduct the greatest number of examinations, resulting in the lowest level of customer service to taxpayers with the greatest need for assistance.
The Transactional Records Access Clearinghouse (TRAC) at Syracuse University analyses IRS internal management reports each month, and through analyzing data from 2022, the group has observed distinct tendencies. The group focused mostly on audits, given the agency’s increased reliance on automatically generated letters addressed to taxpayers.
The IRS conducted 85 percent of its audits using these letters, which request additional information and documents regarding specific issues of interest. From 659,003 in FY 2021 to 626,204 in FY 2022, out of 164 million tax returns filed in FY 2021, the total number of audits decreased.
The rate of income tax audits for people in the lowest income group was 12.7 per 1,000, approximately five times that of those in the highest income bracket (2.3 per 1,000). The likelihood of a millionaire being audited was approximately 1.1%.
Read more: Tax refund: Fastest way to get yours and the proper filing!
IRS Shifts Attention To easy Targets
The TRAC report asserted that the lack of focus on millionaires was the result of severe budget cuts over the years, which forced the IRS to shift its attention to easy marks in an era where the IRS increasingly relies on correspondence audits but lacks the resources to assist taxpayers or answer their questions.
In order to better target millionaire and billionaire tax evaders, the Inflation Reduction Act, which was enacted in August 2022, allocated $80 billion in increased money to the IRS over the next decade, allowing it to hire 87,000 more employees.
The Biden administration and credulous journalists asserted that there would be no rise in audits for persons earning less than $400,000 per year, which is a claim not supported by the bill’s language. Supporters stated that this greater capacity meant that only those at the top would be targeted.
However, this disregards how the IRS’s incentives operate and the possibility that agency-wide reform would be too burdensome.
