The Grassroots Corner August 11th, 2025

           Do you remember how the Inflation Reduction Act of 2022, which passed during the Biden Administration, promised to hire 80,000 new IRS agents to go after the rich and make them pay their fair share of taxes? As it turns out, according to Donald Morgan, AIF®,[i] CPFA[ii], it has not been the rich where the 80,000 new IRS agents have been shining their audit light. You can read Morgan’s article here:
 

https://www.linkedin.com/pulse/irs-audits-2024-why-poor-get-scrutinized-more-than-do-donald-yiexc/.

           Morgan says that, of the 505,514 audits last fiscal year, 444,014, or nearly 88%, targeted individual tax returns. You would be wrong if you think most of these returns were those of wealthy taxpayers. Morgan explains:

           “If you earned between $1 and $49,999, congratulations—you were the most likely to get audited in 2024. In fact, low-income filers, especially those claiming the Earned Income Tax Credit (EITC), were disproportionately targeted. There were 167,091 audits involving the EITC alone [Editor’s note: that number would be slightly over one-third of all audits and nearly 38% of all audits of individual tax returns].

           “Meanwhile, audit rates plummeted as incomes rose. In fact, among audits:

           “53% of $10M+ filers faced no changes after audit.
           “40% of $1M–$5M filers had clean audits.
           “By contrast, only 10% of low-income audits ended without changes.”

           Morgan says the IRS claims the disparity is because most high earners have W-2 income, which is independently reported to the IRS. Most low earners tend to self-report and take advantage of the EITC, which is a tempting target for fraud. Maybe the real reason is that high earners have the resources to push back against IRS audits.

           Morgan offers this advice for staying off the IRS radar:
“1. Keep documentation: Backup every number on your return with receipts, 1099s, W-2s, bank statements.
“2. Avoid sketchy credits: Don’t claim deductions or credits you don’t qualify for. The EITC, in particular, is a red flag.
“3. Respond quickly: If you do get a notice, answer it. Most correspondence audits are resolved without changes—if you provide adequate proof.”
That advice is certainly sound.

            Morgan advises us to “expect the audit gap to grow if funding doesn't return—and if AI and automation continue to drive audit decisions, brace yourself for a system that treats tax enforcement less like justice, and more like machine learning.”

            The lesson from this article is clear. When your friends call for more IRS resources to make the rich pay their fair share of taxes, remind them how that theory worked out in the last fiscal year. Then, remind them of the FAIRtax, which is the only tax plan, existing or proposed, that truly makes the rich and everyone else pay their fair share of taxes.

           I thank our Vice President and Marketing Manager, Randy Fischer, for finding the Morgan article and sharing it with us. If you know some interesting facts about how our tax system impacts certain groups, such as the poor, I would love to hear from you.

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