IRS has started issuing tax refunds since February. Millions of taxpayers have filed their tax returns, IRS analyzes the tax information before processing the returns. Several taxpayers use their tax returns to pay off debts or cover additional expenses, so tax returns are incredibly crucial. The low-income taxpayers are the neediest, and they witness extended payments delays. CBS reports that taxpayers with annual income below $25,000 are most likely to receive delayed tax refunds. IRS audits the low-income groups five times more than other income groups.
Low-income taxpayers are high in number
CBC reports that 13 in every 1,000 tax returns are below the $25,000 annual threshold. The Transactional Records Access Clearinghouse (TRAC) stated that 2.6 in every 1,000 tax returns are above the annual $25,000 limit.
CBS quoted Susan B. Long, co-director of TRAC and a professor of managerial statistics at Syracuse; she said, “When you have a tax system where you are targeting the lowest-wage earners at a much higher rate than higher-income taxpayers, how fair of a tax system is that? And what does it do to the confidence of the taxpayers? At the same time, when you don’t provide the agency with the budget to fairly administer the tax laws – this is shortsighted.” IRS authorities have to analyze a lot of data and ensure complete accuracy in the tax returns.
Audits rates of each income group have declined
The reports show that low-income taxpayers commit mistakes while filing tax returns; they either fill a higher amount or provide incorrect information. IRS said that taxpayers with an annual income above $10 million also had higher audit rates. The reports show that the IRS recruited 82,000 employees in the last fiscal year, lower than the 94,000 employed in 2010. The employee shortage has led to a decline in audit rates.
IRS faces a severe backlog of tax returns at present; several 2020 tax returns are still unprocessed. The official data shows a 50% increase in taxpayers earning above $1 million a year. However, the $1 million audits have decreased from 40,000 in 2012 to 14,000 in 2021. The bottom line is that the audit rates have declined irrespective of the income level.