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The IRS Reduced Earned Income Tax Credit Examinations in Fiscal Year 2024, but the Process to Mitigate Racial Disparity Needs to Be Defined
Why did we do this audit?
We assessed changes to the IRS's Earned Income Tax Credit (EITC) examination strategy relating to both a 2022 Treasury Directive and the fair and equitable selection of EITC returns for examination.
What did we find?
After acknowledging publicly that there were racial disparities in its EITC examination case selection methodologies, the IRS began working toward correcting the problem by: (1) developing and testing two new EITC case selection models, and (2) rebalancing enforcement activities by examining fewer EITC cases and shifting resources to non-EITC workstreams. While the IRS does not yet have results from its efforts, we found that the IRS has not yet established goals to measure success in addressing racial disparities in case
selection.
The IRS will also consider the racial disparities noted in external and internal
studies as quantifiable measures against which they will compare future results. Without established measurable goals, the IRS will be unable to evaluate how its efforts have made a difference reducing disparity issues with selected examinations of taxpayers claiming the EITC.
In Fiscal Year 2024, the IRS significantly decreased Earned Income Tax Credit audits.
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