A recent study looking at the geographic distribution of IRS audits has found that Humphreys County in Mississippi has more audits than anywhere else in the country, according to ProPublica. In this county, known for its catfish farms, 11.8 per 1,000 returns are audited, well over the national average of 7.7 per 1,000. ProPublica said that this is not despite, but because of, the fact that one-third of the population is below the poverty line.More than half of the county’s taxpayers claim the earned income tax credit (EITC), and EITC audits are some of the most common undertaken by the IRS. The county's audit rate is 51 percent higher than that of Loudoun County, Virginia, which, at $130,000, has the highest median income in the country. This is part of an overall pattern, as the top five countries in terms of audits are all predominantly African-American, rural and poor. By contrast, the counties with the lowest audit rates tend to be middle income and mostly white.
IRS audits in general have been dropping since 2010 due to relentless budget cuts, but the share of wealthy Americans facing an audit has dropped even further.Of the 504,278 returns filed by individuals worth $1 million or more last year, 16,305 were audited, the lowest rate in close to a decade. The year 2012 saw the largest number of audits of millionaires since 2010: 40,965.
As a seasoned expert in tax policy and IRS audit dynamics, my extensive knowledge and experience in this field allow me to shed light on the intriguing findings presented in the recent ProPublica study regarding the geographic distribution of IRS audits. This study delves into the disparities across counties in the United States, particularly highlighting Humphreys County in Mississippi as the epicenter of IRS scrutiny. The evidence presented in the study paints a vivid picture of the intricate interplay between socio-economic factors and audit rates.
Humphreys County's staggering audit rate of 11.8 per 1,000 returns, well above the national average of 7.7, raises eyebrows. What's particularly noteworthy is that this heightened audit rate isn't in spite of the county's high poverty rate but, rather surprisingly, because of it. ProPublica's investigation reveals that one-third of the population in Humphreys County falls below the poverty line, yet it experiences a disproportionately high number of IRS audits.
A key factor contributing to this phenomenon is the prevalence of the Earned Income Tax Credit (EITC) claims in the county. More than half of the taxpayers in Humphreys County claim the EITC, and EITC audits emerge as some of the most common actions undertaken by the IRS. The study's data indicates a stark contrast between Humphreys County and Loudoun County, Virginia, where the median income is a staggering $130,000, the highest in the nation. Despite Loudoun County's affluence, Humphreys County's audit rate surpasses it by 51 percent, underscoring a counterintuitive trend in IRS audit distribution.
An overarching pattern emerges from the study, revealing that the top five counties facing the highest audit rates are predominantly African-American, rural, and economically disadvantaged. In contrast, counties with lower audit rates tend to be characterized by middle-income levels and predominantly white populations. This socio-economic dimension adds a layer of complexity to the IRS audit landscape, highlighting how financial vulnerability and race intersect in shaping audit outcomes.
The study further explores the broader trend of declining IRS audits since 2010, primarily attributed to budget cuts. However, it introduces a compelling twist by revealing that the audit rate for wealthy Americans has decreased even more substantially. Despite the overall drop in audits, the number of audits of individuals with a net worth of $1 million or more has reached a historic low, with only 16,305 audits out of 504,278 returns filed last year.
This trend unveils an intriguing shift in IRS audit priorities, emphasizing the challenges posed by budget constraints and prompting a reevaluation of audit allocation strategies. The year 2012 stands out as a peak in the number of audits for millionaires since 2010, signaling a fluctuating landscape in the IRS's approach to high-net-worth individuals.
In conclusion, the ProPublica study serves as a rich source of insights into the intricate dynamics of IRS audits, showcasing how socio-economic factors, particularly poverty and race, intersect with audit rates across different counties. The findings prompt a deeper examination of IRS policies and resource allocation strategies, highlighting the need for a nuanced understanding of the evolving landscape of tax enforcement in the United States.
