• Internal Revenue Service (IRS) found that Black taxpayers face higher audit rates compared to other racial groups
• Commissioner Daniel Werfel raised concern over the issue but added that further research is needed
• Werfel said that the IRS would try to address the problem by analyzing its audit algorithms

The United States Internal Revenue Service's (IRS) chief warned of the agency's reported audit scrutiny of Black taxpayers compared to other racial groups.

In a statement, IRS Commissioner Daniel Werfel said that initial findings supported the idea that Black taxpayers are audited at higher rates than expected of their share of the population. However, he noted that the probe's results need further research to be accurate.

Racial Bias in IRS Audit Rates

On Monday, Werfel wrote a letter to the Senate Finance Committee saying that the IRS would review its audit algorithms for specific anti-poverty tax credits to locate and address any racial biases.

In the letter, the IRS chief said they would be dedicating significant resources to evaluate the extent to which the issue has affected the agency. He noted that the agency's exam priorities, automated processes, and available data contributed to the disparity, as per NPR.

The IRS chief added that the agency was "deeply concerned" about the situation and was working hard to understand and solve any disparities in its practices. On the other hand, Senate Finance Committee Chairman Ron Wyden stated on Monday saying that audit algorithms were the root cause of racial bias in audits.

He added that the issue of racial discrimination has haunted American society for hundreds of years and has come up in algorithms that governments and private organizations implement. Wyden argued that this is despite the algorithms being designed to be neutral regarding people's races.

The findings of the report by the IRS's internal investigation came after researchers from Stanford University, the University of Michigan, the University of Chicago, and the Treasury Department reported findings in January that Black Americans have three to five times more chances to have their federal tax returns audited compared to other racial groups.

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Addressing the Root Cause of the Issue

The report's findings come after various lawmakers and policy experts have called on the agency to review its auditing processes. Previous analysis also found that low-income Americans face audit scrutiny and are five times more likely to be audited than other tax filers due to the Earned Income Tax Credit (EITC), according to CBS News.

The IRS plans to use some of the $80 billion in funding from the Inflation Reduction Act to address the recently discovered issue. Several lawmakers have demanded change following Werfel's admission that Black taxpayers face audit scrutiny.

Massachusetts Democratic Sen. Elizabeth Warren also chipped in on the issue, saying last month that the IRS needed to collect racial data in a way that would allow it to protect taxpayers from racial bias. Wyden added on Monday that it was "shameful" for racial disparities to be guiding the audit selection process, said the New York Times.

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