The Internal Revenue Service said Monday that black taxpayers are far more likely to be tested than others and that it is considering changes to its case selection process to combat discrimination in tax enforcement.
The recognition comes after research was released earlier this year showing black taxpayers were being screened disproportionately, prompting congressmen to call for a review of the methodology and algorithms that help determine who gets selected. The Tax Collection Agency, which received an $80 billion cash injection under the Inflation Reduction Act last year, has said it will work to make the system fairer.
“While more research is needed, our initial findings support the conclusion that black taxpayers may be subject to higher rates than would be expected given their percentage of the population,” Daniel Werfel, the IRS commissioner, wrote in a letter to the senator Ron Wyden of Oregon, the Democratic chair of the Senate Finance Committee.
Mr. Werfel said the IRS has allocated “significant resources” to determine the reasons for the disparity and to evaluate the data available to the agency in deciding who to screen and its automated processes. He suggested that the IRS might consider basing audits on “broader tax issues” rather than focusing on individuals who may be improperly claiming earned income tax credits.
The research found that black taxpayers are three to five times more likely to be tested than non-black taxpayers. It found that the IRS has disproportionately flagged tax returns with potential errors in claiming certain credits, such as the Earned Income Tax Credit, which supplements the income of low-income workers to alleviate poverty.
The IRS doesn’t collect information about race as part of the tax return process, and Mr. Werfel didn’t say if he thinks that should change.
Senator Elizabeth Warren, a Democrat from Massachusetts, said last month that the IRS should collect racial data in a way that allows the agency to protect itself from racial bias.
Mr Wyden said on Monday it was “shameful” that racial bias in the algorithms used by the IRS guided the exam selection process. He asked Mr Werfel to correct this with the next filing system.
“There can be no equality in society when algorithms and other automated systems that affect people’s lives treat them differently because of the color of their skin,” Wyden said.
Mr. Werfel said he intends to use some of the $80 billion allocated to modernize the IRS to improve the reach of underserved communities and help taxpayers claim the credits available to them. He added that the agency will also work to reduce disparities in tax enforcement based on gender, geography and ethnicity.
“The IRS is committed to enforcing tax laws in a fair and impartial manner,” said Mr. Werfel. “When evidence of unfair treatment is presented, we must take immediate action to address it.”
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Alan Rappeport
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