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IRS more likely to audit Black Americans’ taxes, study finds


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Black Americans are roughly three to five times more likely to face an IRS audit than other taxpayers, according to a new study.

While there isn’t evidence of explicit discrimination from the IRS or its revenue agents, the findings show the disparity stems from a faulty software algorithm used by the agency to pick who gets audited.

Based on microdata on roughly 148 million tax returns and 780,000 audits, the study was conducted by economists at Stanford University, the University of Michigan, the U.S. Department of the Treasury and the University of Chicago.

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“Equitable enforcement of our tax laws is a top priority for the administration, and resources provided by the Inflation Reduction Act will enable the IRS to upgrade technology and hire top talent to go after wealthy tax evaders,” a Treasury Department spokesperson told CNBC in an email.

Focus on ‘low dollar, high certainty cases’

Focusing on these individual-level issues rather than the total dollar amount of underreporting seems to be driving these differences.

Evelyn Smith

Study co-author

Smith said the IRS has focused on specific mistakes with claiming the earned income tax credit, such as missing dependents or misreporting income, which are required for eligibility.

“Focusing on these individual-level issues rather than the total dollar amount of underreporting seems to be driving these differences,” she said, noting a shift to self-employed earned income tax credit filers would help address the problem.

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