Audits of Low Income Taxpayers on the Rise | AccountingWEB

Audits of Low Income Taxpayers on the Rise

A recent study by Syracuse University has confirmed that for the first time ever, low income taxpayers are more likely to be audited by the IRS than high income taxpayers.

Low income taxpayers, defined as the "working poor" with annual income below $25,000, are being targeted to catch fraudulent claims of earned income tax credits.

Audits of low income taxpayers, which the study said also included taxpayers who don't file any taxes (income = $0), generally are handled through computer generated correspondence. Face-to-face meetings with IRS agents are rare.

The shift towards lower income audits comes from a mandate from Congress for the IRS to restructure and be more cost effective. Computer generated letters, which by nature are much more cost effective to produce than face-to-face meetings, can easily target "obvious" cases which often revolve around earned income credits.

The study concluded that low income taxpayers are 18% more likely to be audited than wealthy taxpayers.

Computer "red-flagging" by the IRS has "increased tremendously," said a spokesman for the National Taxpayers Union, and may be the way most people encounter the tax man now.

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