Tax Pro Derrick Plummer Offers Insight On Racially biased IRS Tax Audits

May 19, 2023 Pharaoh

A study from a team of economists has shown that Black taxpayers are disproportionately audited by the Internal Revenue Service more than their non-Black counterparts. On May 15, the I.R.S. Commissioner Daniel Werfel confirmed these findings.

Following this report’s publication, many taxpayers and members of Congress expressed disgust at this revelation, according to The New York Times, and even more so after Werfel’s confirmation on Monday. In a letter to Sen. Ron Wyden of Oregon, the Democratic chairman of the Senate Finance Committee, Werfel wrote, “While there is a need for further research, our initial findings support the conclusion that Black taxpayers may be audited at higher rates than would be expected given their share of the population.”

How is this possible if the I.R.S. does not document race when collecting taxes? Researchers from the study conducted an experiment to identify which determinants contribute to this racial bias by isolating several plausible factors.

Their findings did not indicate that this disproportionality results from individual bias. Rather, following the completion of these trials, it was uncovered that the agency’s computer algorithm was the true culprit. Still, some of the findings seem to be grounded in decisions made throughout the past decade, which included efforts to enforce taxes at the height of budget cuts by utilizing automated systems that select returns for auditing.

Such methods result in flagging tax returns with possible errors, including the earned-income tax credit. This credit is often used to rectify payment disparity for low-income employees. As a result, Black Americans are three to five times more likely to be audited than non-Black taxpayers.

In response to this discovery, Werfel has sworn to allocate some of the $80 billion intended to modernize the I.R.S. to extend outreach to underserved communities and help taxpayers claim the credits afforded to them.

“The I.R.S. is committed to enforcing tax laws in a manner that is fair and impartial,” Werfel said. “When evidence of unfair treatment is presented, we must take immediate actions to address it.” However, not everyone is convinced.

In an official statement, Derrick Plummer, a spokesperson for Intuit, wrote, “The report released by the IRS is not grounded in reality. The study ignores the harm a government-run system will have on vulnerable taxpayers and the true costs to taxpayers. The costs estimated in the study to build, operate, and maintain are laughable. The study cherry-picks data to support its flawed conclusion ignoring that only 12% of taxpayers said they would use a government-run system if state returns were not included.

Plummer spoke with BLACK ENTERPRISE about Werfels’s statements. “The IRS commissioner clearly has not demonstrated the urgency and the seriousness of the problem. What we know and what the IRS has now acknowledged is that Black taxpayers are 400% more likely to be audited than other taxpayers. There is no justifiable reason why Black taxpayers should have to deal with the systemic inequities that exist within the system. What’s more telling is the I.R.S. admitted that Black payers are audited at disproportionate rates the day before they announced a study in which the conclusions are highly suspect, and they’ve endorsed a program that would likely, in all intent[ents] and purposes, harm the most vulnerable including Black taxpayers that are already dealing with the systemic inequalities,” he told BE.

“Today, 100% of American taxpayers can file their taxes absolutely free of charge—this is free for them and the government. An IRS direct-to-e-file system is redundant and will not be free—not free to build, not free to operate, and not free for taxpayers. A direct-to-IRS e-file system is a solution in search of a problem, and that solution will unnecessarily cost taxpayers billions of dollars,” he continued.

When asked what changes he believes should be implemented, Plummer responded, “For sure, not having the IRS be the judge, jury, and executioner. What the IRS is proposing to do, and what we already know, is that taxpayers do not want the government to play this role. Moreover, what we know is that what is being proposed will disproportionately harm not just taxpayers in general but especially Black taxpayers and those that are most vulnerable because the I.R.S. would be the one determining how much you owe. Millions of Americans will have to not only trust that the I.R.S. does not have a conflict of interest in ensuring that government revenue is maximizing their tax refund. Additionally, taxpayers would lose a vital check and balance that currently exist. So what does that mean? Right now, there are tax preparations whose interest is ensuring that taxpayers get the most refund possible, which is also a really critical time for so many families.”

Another possible issue that Plummer brought forth is the changes’ impact on accountants, particularly Black accountants. “You would have Black accountants competing with a government system. That means that not only would the IRS start playing the role of tax reviewer, judge, arbiter, and executioner, but they will also become a competitor for Black accountants and accountants in our community. They would also be their regulator. It only serves the interest of the IRS and not the taxpayers and those that fight and advocate for them. It would put people in positions that would have to put trust in the IRS that what they are told is accurate,” he said.

Plummer advises how Black taxpayers can deal with this inequity: raise hell and contact their policymakers. “They need to organize to ensure that their rights are protected. If proponents have their way, then taxpayers will be harmed. And they are doing it in a dishonest way. They have done nothing to study the root cause of systemic inequities that they are clearly not taking seriously. Hold them accountable and push back. Have them address the real problem of Black people being targeted disproportionately.”

For more resources, visit Intuit.com.

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