Democrats Demand Answers: Is the IRS Targeting the Poor?

April 15, 2022 Topic: Internal Revenue Service Blog Brand: Politics Tags: Tax AuditIRSTax SeasonCongressPoverty

Democrats Demand Answers: Is the IRS Targeting the Poor?

Sens. Warren and Chu expressed concern that the IRS is increasingly using examinations conducted by mail to audit low-income households.

Two congressional Democrats are pushing the Internal Revenue Service (IRS) for answers on why the audit rate for poorer households has surged nearly twofold over the past year.

Per Bloomberg, Sen. Elizabeth Warren (D-Mass.) and Rep. Judy Chu (D-Calif.) have directly asked IRS Commissioner Chuck Rettig to divulge the reasoning behind the rising number of audits for individuals earning less than $25,000 a year.

“We know the IRS suffers from underfunding, and we are working to secure substantial, permanent funding so the IRS can take on the tax cheating of giant corporations and the ultra-wealthy,” Chu and Warren wrote in a letter. “But, we also urge you to move swiftly to end the targeting of low-income Americans, in line with the administration’s commitment not to increase audits of taxpayers making under $400,000. … The most vulnerable taxpayers should not shoulder the burden of insufficient IRS enforcement funding simply because they require fewer resources to audit,” they continued.

The lawmakers are asking the Treasury Department and IRS to answer a set of questions and provide data about audit rates for different income groups by April 25.

Syracuse University Data

Warren and Chu cited recent data from Syracuse University that revealed that 1.3 percent of households making less than $25,000 were audited in the 2021 fiscal year, which was up from 0.79 percent the year prior. The audit rate was only 0.45 percent for households earning between $200,000 and $1 million.

The lawmakers also expressed concern that the tax agency is increasingly using correspondence audits, or examinations conducted via mail, to audit low-income households, largely due to the fact that they are simpler and cheaper.

Budget and Staffing Issues

Bloomberg added that “overall audit rates have hit record lows in recent years, with the IRS facing a series of budget cuts and retirements that have depleted its teams.” In response, Warren and Chu noted the need to give the IRS additional funds to help it overcome its chronic underfunding issues and pursue better enforcement strategies for higher-income taxpayers and large corporations.

For months, IRS officials have blamed the agency’s massive backlog of unprocessed personal tax returns and correspondence on several factors. Rettig previously noted that the agency is grossly understaffed, as it is working with 20,000 fewer workers than it had in 2010. Furthermore, the agency is trying to make do with a budget of roughly $11.4 billion, which is 20 percent less than what it was in 2010 when adjusted for inflation, according to the Congressional Budget Office.

President Joe Biden has been pushing for an $80 billion investment over the next decade to rebuild the tax agency’s enforcement capabilities, but that ambitious effort has stalled in the Senate.

Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters