Black men who are raising their children alone are more likely to be audited by the Internal Revenue Service if they use the Earned Income Tax Credit (EITC), compared with married couples of another race who also use EITC, according to a study conducted by the Stanford Institute for Economic Policy Research.

The EITC supports low-and middle-income with taxable earnings from work, replacing welfare as the largest cash-based safety net program in the United States. 

The IRS, which collects $4 trillion to support government programs, relies on audits to detect underreporting tax liabilities and verify that taxpayers qualify for the benefits they claim. 

The Stanford study reported that Black taxpayers were audited between 2.9 to 4.7 times the rate of non-Black taxpayers.

EITC causes a high rate of audits involving Black taxpayers versus non-Black taxpayers. Black taxpayers accounted for 21% of EITC claims, but they were the focus of 43% of EITC audits.

Stanford RegLab teams work with the Treasury Department, which allows them to analyze more than 148 million tax returns and approximately 780,000 audits.

When President Biden took office, he signed Racial Justice Executive Order 13985, which requires all federal agencies to determine how their programs impact racial and ethnic equity.

The discrepancy boggles the mind, although tax returns don’t ask for the taxpayer’s racial or ethnic identity. So, the IRS uses first names, last names, and the locations where many Black people live.

The most striking statistic affecting Blacks and the IRS is that a single Black man with dependents who uses EITC is 20 times more likely to be audited compared to a non-Black, married couple that jointly filed a taxpayer claiming EITC.

“The racial disparity in audit rates persists regardless of whether EITC claimants are male or female, married or unmarried or raising children or are childless,†the study noted.                                                                                                

When Black men report a taxable income of 7.73%  with EITC, they are more likely to be audited by the IRS compared with 3.46% for married non-Blacks couples, according to the study.

For single Black male taxpayers who did not claim dependents, they are audited at 5.66% versus 2% for a non-Black single adult.

Seventy percent of IRS audits happen through the mail, and 50% involve EITC claimants.

The IRS supposedly uses a colorblind method in which Black taxpayers are audited at much higher rates than non-Black taxpayers who use the use EITC.

The burden of correspondence audits on EITC claimants is more likely to fall on lower-income taxpayers whose tax returns are less complex and less likely to lead to litigation.

President Biden’s executive order is intended to make the IRS audit selection algorithm more just. Racial disparities in income are well known, and what the IRS chooses to focus on has big implications for whether audits complement, or undercut a progressive tax system, said Daniel E. Ho of Stanford University.