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According to Syracuse University’s Transactional Records Access Clearinghouse (TRAC), this group is five times more likely to be audited by the IRS than the general population.
On average, TRAC discovered that only 13 out of 1,000 returns filed by taxpayers earning less than $25,000 were audited for the fiscal year that concluded on September 30. For taxpayers earning more than $25,000, the audit rate was 2.6 out of 1,000 returns.
Because the IRS is performing more “correspondence audits,” which include simpler reviews of tax returns conducted via letters and phone conversations rather than in-person visits, this is happening.
Taxpayers who received EITC benefits accounted for more than half of all IRS correspondence audits last year, according to the Taxpayer Advocates Research Center (TRAC).
President Biden signed the $1.9 trillion epidemic relief bill known as the American Rescue Plan last year, which included an expansion of the Earned Income Tax Credit (EITC). With this year’s tax season drawing to a close on April 18, more people than ever before could find themselves on the receiving end of an audit from the Internal Revenue Service.
There’s a reason why EITC returns are more likely to be audited than regular tax returns: they claim a tax credit. For example, according to the conservative Heritage Foundation, up to half of all tax returns claiming the credit was either over-or under-reporting it.
The question is, “How equitable is the tax system?”
According to TRAC co-director and Syracuse University professor of managerial statistics Susan B. Long, the greater rate of audits among low-income taxpayers raises concerns about fairness and efficient use of scarce resources.
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