IRS Shifts Auditing for 'Life-Changing' Tax Credits

Overhauling how the IRS audits low-income taxpayers is a critical step toward more fair audits, many in the industry acknowledged following the agency's announcement earlier this month.

The IRS promised that it would "substantially" reduce audits on refundable tax credits that benefit low-income taxpayers, such as the earned income tax credit. That change follows a study released in January that found Black taxpayers claiming the EITC were audited at higher rates than non-Black taxpayers claiming the credit.

Former National Taxpayer Advocate Nina Olson, now executive director of the Center for Taxpayer Rights, spoke with Bloomberg Tax's Erin Slowey about the impact the audit shift will have on low-income taxpayers and the landscape for claiming the EITC leading up to this announcement.

"It is the difference between being able to have medical care or being able to pay rent or even if you're homeless, putting a deposit down and first month's rent on an apartment," Olson said. "It's life-changing funds."

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