July 4, 2022 - Douglas Myser

GAO says the rich were audited less. Taxpayers with incomes over $200,000 were audited less than the general population, according to a report by the Government Accountability Office. The report shows a definite discrepancy among audit rates for rich versus poorer taxpayers. The GAO also released a second report on the IRS's enforcement of taxpayer's proper claiming of business tax measures providing Covid-19 relief, particularly the employee retention credit and the paid sick and family leave credits. For all individual taxpayers, the average audit rate fell from 0.9% in 2010 to .025% in 2019, or a decrease of 72%, the GAO found. When augmented by taxpayer income, all ranges declined, but not by the same amount. FOr taxpayers with annual incomes from $1 to under $25,000, the rate declined by 61%. The greatest decrease was for taxpayers with incomes of between $200,000 and $500,000, which decreased by 92%. The wealthiest taxpayers, those with incomes of $5 million or more, were the most likely to be audited throughout the decade but also saw their audit rates drop by 86%. GAO says the rich were audited less.

The GAO also looked at taxpayers claiming the earned income tax credit, whose audit rate was higher than the average rate for all taxpayers. It was generally above those of other taxpayers with incomes under $200,000 throughout the decade and above those with incomes below $500,000 for each year except 2010. EITC claimants audit rate also fell during the decade, but by less, 58%. Incomes in all cases were reported as "total positive income", defined as the sum of all positive amounts shown on an individual tax return, with losses treated as zero.

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