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In our Money Mailbag this week, a viewer asks:
“Is it true that you’re more likely to get audited based on where you live?”
In general the IRS audits less than 0.5% of all returns, which in 2016, was 1.1 million audits. The IRS says, when it comes to who gets audited, it shouldn’t matter where you live, or how much you earn, but a new report from ProPublica casts some doubt on that.
Paul Kiel, co-author of the ProPublica report that analyzed audits from 2012 to 2015, calls the findings “really striking.”
“The below-average map is basically the northern part of the United States, and the above-average is more or less the south,” he says. “You could also see things like counties with a high Latino population, like in the south of Texas, or where the Native American reservations are” had higher audit rates.
Tax audits and your location
The U.S. counties with the highest audit rates – with 40% more than the national average -- were in rural locations like Humphries County in Mississippi. A third of all audits are those who claimed the earned income tax credit (EITC). To be eligible for the EITC refund that ranges from $519 to $6,431, depending on how many children you claim, the adjusted gross income for single filers must be in the range of $15,270 for zero children to $49,194 for three or more children. In 2017, 26 million households claimed this credit.
How tax audits are flagged
“These audits are usually initiated by a computer,” Kiel says. “They go after these people that get this credit because they want to make sure that your kids are your kids.”
Of the top 10 most audited counties in the country, ProPublica found most were in the south, mainly in Mississippi:
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Humphreys County, Mississippi
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Tunica County, Mississippi
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East Carroll Parish, Louisiana
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Noxubee County, Mississippi
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Sharkey County, Mississippi
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Shannon County, South Dakota
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Holmes County, Mississippi
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Quitman County, Mississippi
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Coahoma County, Mississippi
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Claiborne County, Mississippi
*Note: Shannon County’s name changed in 2014 and is now Oglala Lakota County, South Dakota.
In response to this report, the IRS has said that audit selections are blind to race and location: “To ensure an equitable process for all taxpayers, fairness and integrity are built into the foundation of our return selection process for audits, which is designed to select returns with the highest likelihood of noncompliance. Audit inventory selection uses systemic risk-based scoring criteria. The audit selection process applies the same business rules, filters and scoring to all returns to identify potentially non-compliant taxpayers. The selection criteria does not include any components or factors related to the geographic location or ethnicity of the taxpayers.”