The Internal Revenue Service has sent a letter to the Senate acknowledging a remarkable fact: it exhibits racial bias. The agency states that Black taxpayers face greater difficulty in taking advantage of tax benefits and are more prone to being audited compared to White taxpayers. Presently, the IRS expresses its dedication to taking necessary actions in order to address and rectify this issue.
In response to a request from the Senate Finance Committee, IRS Commissioner Daniel Werfel wrote a letter on May 15 addressing concerns about the disproportionate number of audits targeting Black taxpayers. Werfel referred to a study conducted by Stanford University, which estimated that Black taxpayers are audited at a rate 2.9 to 4.7 times higher than other ethnic groups. He assured the committee that the IRS is fully focused on this issue and pledged to implement changes before the next tax return filing period.
Interestingly, the reason behind the disproportionate auditing of Black taxpayers is not attributed to explicit racial discrimination, but rather stems from the functioning of the IRS’s computer algorithms. The selection process for audits relies on algorithms that analyze tax returns and identify patterns that could indicate potential issues. One such issue is the potential overclaiming of the Earned Income Tax Credit (EITC), which is designed to benefit low-income families— a group in which Black individuals are more likely to qualify. The IRS is currently exploring ways to modify its algorithms to prevent the excessive targeting of Black taxpayers for audits.
The IRS appears to have drawn inspiration from the research and advocacy of Dorothy Brown, a retired law professor at Emory University in Atlanta, Georgia. Brown has long been asserting the presence of racial bias within the federal tax system and has authored a book titled “The Whiteness of Wealth.” With the current emphasis on equity during the Biden administration, the IRS appears to have embraced Brown’s assertions as substantiated realities.
