Higher Risk of Audit for Certain Taxpayers

The following excerpt was originally posted in the February 16th, 2023 The Kiplinger Tax Letter. We do not claim to be the author, nor the owner of this content.

Higher Risk of Audit for Certain Taxpayers

“Black taxpayers have a higher risk of audit than other groups of individuals, according to a recent study by the Stanford Institute for Economic Policy Research. The authors, who include two employees of the Treasury Dept.’s Office of Tax Analysis as well as academicians from prestigious universities, conclude that black taxpayers are audited at a rate of about 3 to 5 times the rate of non-black taxpayers.

The primary source of the disparity involves the Earned Income Tax Credit. The Revenue Service isn’t intentionally auditing black people more than other groups. EITC audit selection is largely automatic, and the IRS doesn’t collect information about a taxpayer’s race. But black filers who claim the EITC are between 2.9 and 4.4 times more likely to be audited as compared with non-blacks who claim the EITC, the researchers find.”

Robert Greene, CPA: I suspect, without specific evidence, that taxpayers who fall into this category may be utilizing local neighborhood tax preparers who are not CPAs or enrolled agents. They are presumed to be less qualified, and the results of their work are more likely to be erroneous and, therefore, draw scrutiny.