IRS Audits Hit the Working Poor, African Americans Harder

IRS Audits Hit the Working Poor, African Americans Harder


Where does the IRS focus its audits in the U.S.? According to a new study by Kim M. Bloomquist, a former senior economist at the tax agency, the most heavily audited county is not, as you might suspect, New York County, home to Wall Street and many finance industry titans, or Santa Clara County, California, where Silicon Valley millionaires prowl the streets in electric-powered sports cars. No, the area whose residents have the highest audit rate is Humphreys County, Mississippi, and its residents are quite poor and disproportionately African American.

Writing about the report at ProPublica, Paul Kiel and Hannah Fresques say that the working poor are audited by the IRS at unusually high levels, and as a result, residents of rural counties in the South receive more attention from the tax agency than their fellow citizens in wealthier parts of the country.

The reason? The working poor are more likely to claim the earned income tax credit, which is designed to help low-income workers by boosting incomes through tax rebates. But the IRS now audits EITC recipients “at higher rates than all but the richest Americans,” Kiel and Fresques say, citing a ProPublica study published last year. As a result, the counties with the highest audit rates are poorer than average, and many have higher-than-average minority populations:

“The five counties with the highest audit rates are all predominantly African American, rural counties in the Deep South. The audit rate is also very high in South Texas’ largely Hispanic counties and in counties with Native American reservations, such as in South Dakota. Primarily poor, white counties, such as those in eastern Kentucky in Appalachia, also have elevated audit rates.”

Humphreys County attracts so much attention from the IRS because more than half of its taxpayers claim the earned income tax credit, the authors say. “Humphreys, with a median annual household income of just $26,000, is audited at a rate 51 percent higher than Loudoun County, Virginia, which boasts a median income of $130,000, the highest in the country.”

Here's a map from the study showing the counties with the highest audit rates: