Sen. Elizabeth Warren (D-Mass.) and 24 other Senate Democrats have called on the Internal Revenue Service (IRS) to focus new audits on households earning more than $400,000 annually and large corporations. In a letter, the Democrats argued that “billionaires cannot avoid scrutiny by using tax-avoidance strategies to report low incomes,” and that Americans making less than $400,000, especially low-income families, should not have to face additional IRS reviews.
The Democrats also asked the IRS to make sure wealthy taxpayers are not audited at lower rates than low-income Americans, and called on the top 1% of wealthy Americans to “meet their responsibilities.” From 2010 to 2019, the rate of taxpayer audits fell from 0.9% to 0.25%, regardless of income, according to the Government Accountability Office. But audit rates decreased the most for Americans with incomes of $200,000 or more, with those making $5 million or more seeing the largest drop in audit rates, falling from 16% to 2.4%. An analysis of IRS data from Transactional Records Access Clearinghouse (TRAC) at Syracuse University found that households earning less than $25,000 annually were five times as likely to be audited by the IRS.
The IRS received an $80 billion increase in funding for 2022-31 through the Biden Administration’s Inflation Reduction Act, which is expected to bring in an additional $204 billion in revenue over the next decade. In 2022, the IRS audited 626,204 of the more than 164 million individual income tax returns.
The call for increased audits on wealthier households and corporations comes after the IRS received a boost in funding and renewed focus on taxpayer rights. While the IRS has made efforts to increase fairness in audits, the disparity in audit rates between the wealthiest Americans and low-income Americans is still significant. It remains to be seen if the IRS will comply with the Democrats' request and if it will have an effect on the audit rate disparity.