Poor Taxpayers in Rural Counties Most Likely to be Audited

The IRS audits earned-income tax-credit recipients at a rate higher than all but the wealthiest Americans.

The IRS audits earned-income tax-credit recipients at a rate higher than all but the wealthiest Americans. Shutterstock

 

Connecting state and local government leaders

New research finds that low-income taxpayers who receive the earned-income tax credit are more likely to be audited than wealthier Americans.

Eight of the top 10 most-audited counties in the country are poor, rural areas in Mississippi where taxpayers disproportionately receive earned-income tax credits, according to new research from a former economist with the Internal Revenue Service.

The high number of residents receiving the earned-income tax credit, or EITC—meant to help working people with low incomes—is precisely why those areas are hit hardest with audits, according to the research. The IRS audits those recipients at higher rates than all but the wealthiest taxpayers, shifting limited resources to ensure that people who claim the tax credit are doing so correctly. The tax agency purposely ignores geographic information when deciding who to audit to “balance coverage across the country,” but that practice often has the opposite effect, wrote Kim Bloomquist, author of the study, first published on the tax news website TaxNotes.

“A predictable consequence of this realignment of IRS enforcement is a growing regional bias in audit case selection,” he wrote. “This is because EITC taxpayers are not randomly distributed throughout the country.”

Bloomquist mapped the distribution of IRS audits using federal tax return and enforcement data. The results showed that places with a higher percentage of taxpayers receiving the EITC also had a higher distribution of audits—largely poor, rural and predominantly African-American parts of the country, particularly in the South.

“Audit intensity is generally highest in the Southern states and some counties in the Northern Plains, Mountain and Western states,” he wrote. “Audit intensity is generally lower in the upper Midwest, Mid-Atlantic and New England states.”

From 2012 to 2015, eight of the most-audited counties were in Mississippi (Humphreys, Tunica, Coahoma, Noxubee, Holmes, Quitman, Sharkey and Claiborne), with Louisiana (East Carroll Parish) and Alabama (Greene) rounding out the top 10. Slightly more than half of taxpayers in those counties claimed the EITC, and according to 2017 census data, the “population of these 10 counties is 79 percent nonwhite (nearly all black or African-American),” Bloomquist wrote.

The 10 least-audited counties are concentrated mostly in the Midwest—Ohio (Mercer, Putnam), North Dakota (Sargent), Wisconsin (Washington, Calumet) and Minnesota (Sherburne)—where just 10 percent of taxpayers claimed the tax credit, and only 7 percent of the 2017 population was nonwhite.

Nationwide, Humphreys County, Mississippi is the most audited, a rural area with a median household income of $26,188. The least-audited, according to the data, is Delani Burough, Alaska, with a median household income of $83,295.

Bloomquist offers several fixes to the problem, beginning with the most obvious answer of increasing the IRS budget to facilitate more audits of wealthier taxpayers. In the absence of additional funding, the agency could “broaden its audit selection criteria to include other significant areas of compliance risk and not focus so narrowly on EITC claimants,” he wrote.

“Lastly, the IRS should explicitly take into consideration any regional bias of its audit selection criteria, intentional or otherwise, by ensuring the audit coverage rate for each state does not vary substantially from the national average," he wrote. "While regional equity is not the sole factor the IRS ought to consider in achieving fairness for all taxpayers, the main point raised by this report is that the current policy of ignoring geography in selecting tax audits does not achieve the balanced coverage the IRS claims.”

Kate Elizabeth Queram is a Staff Correspondent for Route Fifty and is based in Washington, D.C.

NEXT STORY: Considering a ‘Progressive’ Income Tax in a Fiscally-Stressed State

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.