United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Finance Committee, and United States Representative Judy Chu (D-Calif.), a member of the House Ways and Means Committee, sent a letter to Secretary of the Treasury Janet Yellen and Internal Revenue Service (IRS) Commissioner Charles Rettig expressing concerns about higher IRS tax audit rates for low-income Americans and Rettig’s response in a recent House hearing to new findings about these high audit rates.
The lawmakers are calling for the IRS to stop unfairly targeting low-income Americans with audits and are asking the Treasury Department and IRS for information about their audit rates for low-income Americans and their plans to release audit data to the public.
“We know the IRS suffers from underfunding, and we are working to secure substantial, permanent funding so the IRS can take on the tax cheating of giant corporations and the ultra-wealthy. But, we also urge you to move swiftly to end the targeting of low-income Americans, in line with the Administration’s commitment not to increase audits of taxpayers making under $400,000… The most vulnerable taxpayers should not shoulder the burden of insufficient IRS enforcement funding simply because they require fewer resources to audit,” wrote the lawmakers.
A recent analysis of FY2021 tax data by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University found that the IRS audits low-income families with less than $25,000 in gross receipts at five times the rate of everyone else.
When Chu asked Rettig about these concerning audit numbers at a March 17 House Ways and Means Subcommittee on Oversight hearing, he called the findings “absolutely 100% false,” and stated that he was “tired of having to deal with this issue.”
But the sources that he referred to in his assertions are outdated and do not support his claim. The new TRAC data is the most recent and most accurate data available on tax filing in FY2020 and FY2021.
While the Biden administration’s American Families Plan Tax Compliance Agenda committed to not increasing the rates of audits for those earning less than $400,000 annually, there is no consistent public release of audit data or a plan to release audit data, making it virtually impossible to monitor compliance with this commitment.
Warren and Chu noted the need to give the IRS additional funding to help it overcome its chronic underfunding and pursue better enforcement strategies for higher-income taxpayers and large corporations, but they called on the Treasury Department and the IRS to immediately stop targeting low-income taxpayers with audits.
The lawmakers are asking the Treasury Department and IRS to answer a set of questions and provide data about audit rates for different income groups and their plans to release public data by April 25, 2022.
Warren has led the call for the IRS to enforce the tax system fairly on all Americans, crack down on wealthy taxpayers and large corporations who avoid paying taxes, and fund the IRS with the resources it needs to fully enforce the nation’s tax laws.
- In April 2022, at a hearing of the Senate Finance Committee with Rettig, Warren highlighted the IRS’s ability to implement President Biden’s billionaire’s income tax proposal and called for additional IRS funding.
- In February 2022, at a hearing of the Senate Finance Committee, Warren made the case for increased funding for the IRS through the Build Back Better Act and called on the administration to create the simplified filing tools proposed in her Tax Filing Simplification Act.
- In January 2022, Warren and Senator Jeff Merkley (D-Ore.) led a letter calling for increased IRS funding as Americans prepare for the 2022 tax filing season.
- In May 2021, Warren introduced the Restoring the IRS Act of 2021, which would provide the IRS with the resources it needs to crack down on tax dodging by the rich and corporations by providing mandatory funding and strengthening information reporting.
- In April 2021, during a hearing exchange in the Senate Committee on Finance, Rettig agreed with Warren on the need for increased IRS funding.
- In April 2019, Warren reintroduced the Tax Filing Simplification Act, which would require the IRS to provide its own free tax filing software, and take other steps to make tax filing easier and cheaper.