Werfel To Address Racial Disparities in Audits

Werfel To Address Racial Disparities in Audits

Internal Revenue Service Commissioner Daniel Werfel said changes are coming to address racial disparities among those who get audited annually.

“I will stay laser-focused on this to ensure that we identify and implement changes prior to the next tax filing season,” Werfel stated in a May 15, 2023, letter to Senate Finance Committee Chairman Ron Wyden (D-Ore.).

The issue of racial disparities was raised during Werfel’s confirmation hearing an in subsequent hearings before Congress after taking over as commissioner in the wake of a study issued by Stanford University that found that African American taxpayers are audited at three to five times the rate of other taxpayers.

The IRS “is committed to enforcing tax laws in a manner that is fair and impartial,” Werfel wrote in the letter. “When evidence of unfair treatment is presented, we must take immediate actions to address it.”

He emphasized that the agency does not and “will not consider race as part of our case selection and audit processes.”

He noted that the Stanford study suggested that the audits were triggered by taxpayers claiming the Earned Income Tax Credit.

“We are deeply concerned by these findings and committed to doing the work to understand and address any disparate impact of the actions we take,” he wrote, adding that the agency has been studying the issue since he has taken over as commissioner and that the work is ongoing. Werfel suggested that initial findings of IRS research into the issue “support the conclusion that Black taxpayers may be audited at higher rates than would be expected given their share of the population.”

Werfel added that elements in the Inflation Reduction Act Strategic Operating Plan include commitments to “conducting research to understand any systemic bias in compliance strategies and treatment. … The ongoing evaluation of our EITC audit selection algorithms is the topmost priority within this larger body of work, and we are committed to transparency regarding our research findings as the work matures.”

By Gregory Twachtman, Washington News Editor

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