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If you thought the IRS audited complicated, high-dollar tax returns, think again. It turns out that the poorest among America's taxpayers are the most likely to be audited. According to the Transactional Records Access Clearinghouse (TRAC), an organization dedicated to giving Americans information about what their federal government does and how much it costs, America's lowest income earners are five times more likely to be audited than wealthier people.
TRAC reported that the IRS audited 0.4% of the 160 million individual income tax returns it processed each year. Most of these audits were accomplished by "correspondence audits." This means that the IRS sends a letter to the taxpayer asking for documentation proving a specific line item in the return. Of the 659,003 audits the IRS conducted last year, 85% of them were correspondence audits.
What's noteworthy is the targets of these very simple audits:
[O]ver half of these correspondence audits were targeted at the small proportion of workers with incomes so low they had claimed an anti-poverty earned tax credit to offset the tax otherwise due on their modest earned income. To repeat: over half — fully 54 percent — of all correspondence audits last year targeted the small proportion of returns with gross receipts of less than $25,000 claiming an earned income tax credit.
Even taxpayers with total positive income from $200,000 to $1,000,000 had only one-third the odds of audit compared with these lowest income wage earners. A total of nearly 9 million taxpayers reported these high-income levels. Yet less than 40 thousand of their returns were audited by the IRS in FY 2021 — just 4.5 out of every 1,000 of these returns. [Citation omitted.] This contrasts sharply with 13.0 out of every 1,000 of these lowest income returns that were audited last year by the IRS.
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