Business

Collaboration Between Stanford and the Department of the Treasury: Black Taxpayers Are Targeted for Audit More Than Others

According to Stanford RegLab, Black taxpayers receive IRS audit notices at least 2.9 times more frequently than non-Black taxpayers and possibly as much as 4.7 times more often. The team’s research showed that a set of internal IRS algorithms causes racial differences in audit selection. Goldin compared them to the recipe for Coca-Cola: “It’s completely secret.”

Published

4 years ago

February 25, 2023

Oakland Post

To better understand this audit selection bias, the research team modeled the racial impact that various alternative audit selection policies might have. The result showed how the IRS could change its secret algorithm to make it less unfair to people of different races.

By Stacy M. Brown
NNPA Newswire Senior

According to Stanford RegLab, Black taxpayers receive IRS audit notices at least 2.9 times more frequently than non-Black taxpayers and possibly as much as 4.7 times more often.

The new study included research by Daniel E. Ho, the William Benjamin Scott and Luna M. Scott Professor of Law at Stanford Law School, faculty director of the Stanford RegLab, a senior fellow at the Stanford Institute for Economic Policy Research, Hadi Elzayn, a researcher at the Stanford RegLab, Evelyn Smith, Ph.D. candidate at the University of Michigan, and Arun Ramesh, a pre-doctoral fellow at the University of Chicago; Jacob Goldin, a professor of tax law at the University of Chicago; and economists in the U.S. Department of Treasury’s Office of Tax Analysis.

The researchers concluded that the disparity “is unlikely to be intentional on the part of IRS staff.”

The team’s research showed that a set of internal IRS algorithms causes racial differences in audit selection. Goldin compared them to the recipe for Coca-Cola: “It’s completely secret.”

To better understand this audit selection bias, the research team modeled the racial impact that various alternative audit selection policies might have.

The result showed how the IRS could change its secret algorithm to make it less unfair to people of different races.

“The IRS should drill down to understand and modify its existing audit selection methods to mitigate the disparity we’ve documented,” Ho said.

“And we’ve shown they can do that without sacrificing tax revenue.”

Although there have been long-standing questions about whether the IRS uses its audit powers somewhat, Ho said it was challenging to study because tax returns are private.

The IRS’s approach to audit decisions was confidential.

That changed when, on his first day in office, President Joe Biden signed Executive Order 13985. This order requires all federal agencies to examine how their programs affect racial and ethnic equity.

To apply that order to the IRS tax return audit program, economists at the Treasury Department worked with the Stanford RegLab team to analyze more than 148 million tax returns and about 780,000 tax returns for 2014. The RegLab team used anonymous data to do the analysis.

Even with all that information, the research team found that tax returns do not ask for a person’s race or ethnicity.

So, the team adapted and improved on a state-of-the-art approach that uses first names, last names, and geography (U.S. Census block groups) to predict the probability that a person identifies as Black.

And they confirmed their racial identification results using a North Carolina sample of voter registration records. In that state, until recently, when people registered to vote, they had to check a box for race and ethnicity.

After finding that Black taxpayers were 2.9 to 4.7 times more likely to be audited than non-Black taxpayers, the team looked at why this might be the case.

They suspected that the problem lay with an IRS algorithm’s use of the Dependent Database, which flags a potential problem and generates an audit letter to the taxpayer.

That instinct proved correct in that most racial differences were found in so-called “correspondence” audits. These audits are done by mail rather than in person.

The team also found that the IRS audits people more often who claim the Earned Income Tax Credit (EITC). The EITC helps low- and moderate-income people.

But claiming the EITC only explains a small percentage of the observed racial disparity.

The largest source of disparity occurs among EITC claimants. Indeed, Black taxpayers accounted for 21% of EITC claims but were the focus of 43% of EITC audits.

The racial disparity in audit rates persists regardless of whether EITC claimants are male or female, married or unmarried, raising children, or childless.

But it is most extreme for single male taxpayers claiming dependents (7.73% for Black claimants; 3.46% for non-Black claimants) and for single male taxpayers who did not claim dependents (5.66% for Black; 2% for non-Black).

Perhaps the most striking statistic is this: A single Black man with dependents who claims the EITC is nearly 20 times as likely to be audited as a non-Black jointly filing (married) taxpayer claiming the EITC.

Although the team does not know precisely what algorithm the IRS uses to choose audits, they thought of several possible reasons for high audit rates.

First, they tried an “Oracle” approach. They used a dataset called the National Research Project (NRP).

Because each tax return in this dataset was subjected to a line-by-line audit, the amount of underreported tax liability is known.

So, the researchers looked at what would happen if the IRS selected taxpayers based on the known amount of underreported tax in the NRP dataset.

The result: The racial difference in audit selection flips.

The IRS would audit more non-Black taxpayers than Black taxpayers to catch the most underreported income tax.

The team also used the NRP dataset to train a model to predict the likelihood that a taxpayer has underreported income and the magnitude of a taxpayer’s underreporting for the entire 2014 dataset.

They found that an approach focused just on the likelihood that there’s underreporting of at least $100 would result in auditing more Black taxpayers (as was observed).

By contrast, focusing on the magnitude of underreporting (the amount of money unpaid by a taxpayer) would yield a result much closer to the oracle: More non-Black taxpayers would be audited than Black.

“The choice to focus on whether there is underreporting, as opposed to the magnitude of underreporting, is connected to broader structural sources of economic inequality and racial justice,” Smith said.

Because far more Black taxpayers have lower income, they have less opportunity to underreport substantial amounts of income, the researchers concluded.

By contrast, Smith said, “focusing audits on the amount of underreported income will disproportionately end up focusing on higher income individuals who are less likely to be Black taxpayers.”

Finally, the team wondered if the racial disparity in audits springs from IRS and congressional concerns about refundable tax credits, including the EITC and several others.

When someone claims one of these social security tax credits, they receive a refund even if they did not pay any taxes.

And some in government think it’s more important to avoid paying money to someone who claims it inappropriately than to collect all the tax dollars due from someone engaged in some other form of tax evasion.

To test the hypothesis that this approach would have a disparate impact on Black taxpayers, the team examined what would happen if the IRS focused audits specifically on the underreporting due to over-claiming of refundable tax credits (the EITC as well as two others) rather than total underreporting.

Their findings: This policy would result in Black taxpayers being audited at rates like what the team observed in the 2014 data.

Seventy percent of IRS audits happen through the mail, and 50% involve EITC claimants.

The team found that correspondence audits of EITC claimants are easy to trigger compared to labor-intensive field audits, cost very little, and require minimal effort by IRS personnel.

Unfortunately, the burden of correspondence audits on EITC claimants is more likely to fall on lower-income individuals, whose tax returns are less complex and less likely to lead to litigation, according to a recent study by the same research team.

In their new work, the team found that additional aspects of the IRS audit selection process have a racially disparate impact in the United States.

For example, even among correspondence audits of EITC claimants, the IRS devotes fewer resources to auditing EITC returns with business income.

The team concluded suggested that it’s because it would be more expensive to audit EITC returns with business income (about $385 per audit compared to $29 per audit for EITC claimants with no business income), Elzayn said.

And the team found this cost-saving measure has a disparate impact on Black taxpayers, who make up only 10% of EITC claimants reporting business income but 20% of EITC claimants who don’t report business income.

Yet even if IRS resource limits explain some of the racial disparities the team observed, they don’t explain all of them.

“Even holding fixed how many audits are devoted to EITC claimants who report business income, we still observe racial disparities,” Elzayn said.

The study’s authors have not made any formal recommendations for making the IRS audit selection algorithm more just.

Instead, they have written about the possible effects of alternative policies. This allows the IRS to reduce the racial impact of its system of choosing auditors.

These include predicting and focusing on the magnitude of taxpayers’ underreported income rather than just the likelihood of it; using IRS resources to audit more complex returns rather than focusing only on the simpler ones that are cheaper to audit; and viewing dollars as equal whether they are to be paid in refundable credits or received in taxes.

Before Biden signed the Racial Justice Executive Order that engendered this research project, the IRS needed more impetus and the ability to do that.

Now that they know the equity implications of how they select audits, Ho hopes they will tweak their confidential audit selection algorithm.

“Racial disparities in income are well known, and what the IRS chooses to focus on has big implications for whether audits complement, or undercut, a progressive tax system,” Ho said.

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Black History

Five Hospitals Said No! Who Will Help Annette Henry Recover?

Annette Henry, a 67-year-old Oakland woman, is struggling to access essential medical care after a devastating stroke left her with a rare neuropathic pain syndrome. Despite medical documentation confirming her need for inpatient rehabilitation, five different Bay Area hospitals have denied her admission, often citing her inability to meet rigid therapy thresholds. Her family’s efforts to seek intervention from state and federal lawmakers have yielded no results, leaving Henry at home without a clear path to recovery. To see how these systemic failures are impacting her health, read more.

Published

3 days ago

November 3, 2026

Post News Group

By Tanya Dennis

A tangle of red tape and contradictions between health providers and Medicare rules have impeded an Oakland woman’s ability to recover from a stroke she had last year.

Her family – who are her caretakers – have reached out to various professionals and state and federal lawmakers for help to no avail.

At 67, Annette Henry needs inpatient stroke rehabilitation after a devastating stroke in May 2025. Since then, multiple Bay Area hospitals have denied it. She was accepted into a rehabilitation facility in June 2025 but discharged prematurely in July, in essentially the same condition.

Three hospitals where she was a patient pushed skilled nursing over inpatient rehabilitation. Two more declined referrals.

Now at home, Henry is caught in a system that measures her need for treatment against the limitations treatment should address.

Medical professionals have documented her need for a higher level of care.

In August 2025, a Medicare Quality Improvement Organization (QIO) overturned Henry’s discharge from an inpatient rehabilitation facility (IRF).

The QIO’s independent physician reviewer found she had not received the “intensive therapy program outlined on admission,” according to the Aug. 30, 2025, determination letter. Yet the decision did not secure her readmission or guarantee continued rehabilitation.

Henry has central post-stroke pain, a rare neuropathic pain syndrome that can make movement and touch intensely painful. Her pain specialist recommended inpatient rehabilitation alongside pain management.

Nevertheless, facilities have cited her inability to tolerate three hours of daily therapy as a reason to deny inpatient rehabilitation.

That practice raises questions about Medicare coverage policy. In Hooper v. Sullivan, No. H-80-99 (D. Conn. 1989), the court recorded the parties’ agreement that denials based on numerical utilization screens, diagnostic screens, treatment norms, the “three-hour rule,” or other “rules of thumb” were not appropriate.

CMS subsequently cited Hooper in its Aug. 7, 2009, final rule (74 Fed. Reg. 39762, 39794). The policy is also addressed in the Medicare Benefit Policy Manual, Chapter 1, Section 110, and CMS’s June 1 Review Choice Demonstration for IRF Services: Operational Guide.

These authorities underscore the need for individualized assessments rather than rigid numerical thresholds.

The central contradiction is stark: the pain and disability that make rehabilitation necessary have been cited as reasons to deny it. UCSF Stanyan’s April 7 discharge summary for Henry states that acute rehabilitation unit (ARU) placement was declined for “inability to tolerate three hours of therapy daily.” Without appropriate treatment, Henry risks further decline.

Her records document complications associated with prolonged immobility.

Orthopedics documented flexion contractures of the small and ring fingers on March 19.

Chest imaging on April 1 showed bibasilar dependent atelectasis, a condition involving reduced inflation of the lower portions of both lungs. These concerns can be examined through her medical records and photographs.

“What does a ‘not reasonable’ discharge look like?” her family asks. For them, it looks like an appeal decision recognizing a problem without ensuring a remedy: repeated referrals, denials and a patient still without the rehabilitation her treating professionals have recommended.

The family has sought help from the California Department of Public Health and the federal Office for Civil Rights to no avail. They contacted U.S. Rep. Lateefah Simon in June 2025, while Henry was in rehabilitation; Senator Alex Padilla in May 2026; and Senator Adam Schiff in September 2026.

DeCuir says the family received no meaningful assistance and was redirected to the QIO or advised working with a social worker after Henry had already been discharged.

The consequences extend beyond rehabilitation. The family reports that Henry has struggled to attend in-person specialist or any appointments and needs in-person evaluation and treatment for complications, recommended evaluations, health screenings and preventive care.

Her mobility limitations have become barriers to broader medical care. Every office tells her their office is not set up to accommodate her. This has happened with specialty care, out-patient services, screenings and physical therapy.

Henry is a Black woman on Medicare, and her family believes her experience raises concerns about unequal access to intensive rehabilitation. Research has documented disparities in discharge to inpatient rehabilitation rather than skilled nursing, underscoring the importance of individualized review.

CMS, state regulators and healthcare providers should examine Henry’s records, assess her needs on their clinical merits and explain how the applicable coverage standards were applied, and whether they are being enforced.

Rehabilitation is not a reward for patients who can already tolerate treatment. It is care intended to help people recover function. Henry’s case asks whether a system designed to support recovery can leave a patient without a path to it.

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Black History

From Backyard Grilling to Jack London Square: Jamale Carlyle’s Chicken Wing Success Story

Jamale Carlyle turned a backyard hobby into a flourishing business after using grilling to cope with the loss of his mother and sister. The former corporate executive and CPA transitioned from a twenty-year career in the power industry to selling chicken wings at farmers’ markets in Tracy and Oakland. Following immediate success and viral social media attention, Carlyle opened two permanent storefronts and established a charitable partnership to support local youth. His journey highlights a unique path from internal auditing to community entrepreneurship. Read more.

Published

3 days ago

November 3, 2026

Post News Group

Jamale Carlyle had a long career working for power companies before embarking making his grilling hobby into a business. Courtesy photo.

By Tanya Dennis

For Jamale Carlyle, what began as a way to cope with personal loss has grown into a thriving chicken wing business with locations in Tracy and Oakland’s Jack London Square.

Raised in Los Angeles, Carlyle remains a southern kid at heart, guided by the values and principles instilled in him growing up. In 2020, he lost his sister, and two months later, his mother passed away. The losses left him grieving half of his immediate family and searching for a way forward.

He turned to God, and to two favorite pastimes: grilling chicken wings and deep sea fishing. Friends who gathered in his backyard encouraged him to turn his chicken wings into a business.

Carlyle had built a successful corporate career before becoming an entrepreneur. An economics graduate of the University of California, Irvine, he earned a master’s degree in accounting from the University of Southern California and became a certified public accountant (CPA).

He spent more than 20 years in the power industry, including working for Edison International in Los Angeles and Boston. He later joined JP Energy Partners in Dallas, helping its team take the company public.

After moving to San Francisco in 2016, Carlyle spent 10 years with Pattern Energy, a wind energy company, where he served as vice president of Internal Audit and took on numerous corporate responsibilities.

But in 2025, grilling became more than a hobby. Carlyle began selling his wings at farmers’ markets, initially dedicating four hours every Saturday. Nervous about his first outing in Tracy, he wondered whether his friends had simply been encouraging. Instead, he sold out on opening day.

He later brought his business to Jack London Square’s Farmers Market, where he again sold out on his first day. As demand grew, he expanded into catering before opening his Tracy storefront in May 2026 and his Jack London Square location in July.

Social media helped fuel the momentum. In Tracy, enthusiastic reviews on the community’s Rants and Raves Facebook page brought customers through the door. His Jack London Square debut also gained traction online, generating approximately 100,000 views on social media on his on opening day.

Still processing the rapid growth, Carlyle describes the business as something that began in his backyard as a stress reliever and became an unexpected calling, and a way of giving back.

“Giving back” has led to a partnership with Mike Jenkins, owner of Oakland Strong, a nonprofit gym known for Olympic style weight lifting and developing national and international champions. After Jenkins visited Carlyle’s store with members of his team, Carlyle returned the visit, and the two began discussing ways to partner to support the community.

“I’m really big on charity. I believe in giving back to the community,” Carlyle said. “I knew before I opened my store, I’d be doing something like this, this is what God wants me to do.”

Their collaboration will introduce the “Oakland Strong Bowl,” featuring 10 dry-rub Cajun wings and a vegetable-rice bowl for $17.99, with $2 from each purchase donated to the Oakland Strong Foundation. The initiative is expected to launch in early November.

“This builds community in Oakland and Jack London Square,” Carlyle said.

Looking ahead, Carlyle plans to expand the menu with chicken thighs, chicken tacos and additional sides. He is also pursuing a liquor license to create a destination where customers can enjoy wings while watching sports.

For now, he is focused on growing his two locations. But with customers embracing his food and his commitment to giving back, Carlyle sees the possibility of bringing his chicken wings to more communities throughout the Bay Area.

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Business

SEIU Local 1000 and State of California Will Continue to Negotiate New Labor Contract

Thousands of California state employees represented by SEIU Local 1000 recently staged a one-day walkout to protest stalled contract negotiations with Governor Gavin Newsom’s administration. The union, which represents approximately 100,000 public workers, is demanding a 20% wage increase over three years and an end to mandatory four-day in-person work requirements. While the initial strike has concluded, union leadership warns that further demonstrations are likely if the state continues to reject their demands for better pay and telework flexibility. Negotiations are expected to continue as both sides seek a resolution. Read more.

Published

3 days ago

November 3, 2026

Post News Group

California state workers staged a one-day strike Oct. 21 to protest alleged unfair labor practices and stalled contract negotiations over wages, remote work requirements and health care costs. The workers' previous contract expired June 30. CBM photo by Antonio Ray Harvey.

By Antonio Ray Harvey, California Black Media

After the Service Employees International Union (SEIU) Local 1000 labor contract expired June 30 and talks with Gov. Gavin Newsom’s administration stalled, the union stepped up its efforts to secure a new agreement, saying its demands had gone unheeded.

On Oct. 21, thousands of state employees represented by SEIU Local 1000 staged a one-day walkout to protest alleged unfair labor practices during negotiations with Gov. Gavin Newsom’s administration.

Although the strike has ended, SEIU Local 1000 President Anica Walls said further demonstrations or an expanded strike are highly likely if contract negotiations remain stalled. The union represents approximately 100,000 public employees statewide.

“We are out here because our jobs matter,” Wells said. “If they continue to refuse to bargain with us in good faith, we are prepared to escalate.”

Sen. Lola Smallwood-Cuevas (D-Los Angeles) expressed support for SEIU Local 1000’s labor action in an Instagram post, emphasizing the importance of fair treatment for workers.

“I stand in complete solidarity with SEIU Local 1000,” Smallwood-Cuevas stated. “More than 100,000 state workers they represent are on strike today fighting for good-faith bargaining, fair treatment, and a contract that reflects the value of the essential public services they provide every day—all things that should be a given for the workers our state relies on the most.”

Smallwood-Cuevas, a member of the California Legislative Black Caucus (CLBC) added, “When California’s workers hold the line, the whole nation pays attention.”

According to union representatives, SEIU Local 1000 is seeking a contract that addresses rising living costs and provides greater workplace flexibility. The union is demanding a 20% wage increase over three years and an end to Gov. Gavin Newsom’s requirement that state employees work in person four days a week.

The union is also seeking increased state contributions toward employee health care benefits to reduce workers’ out-of-pocket costs.

On Sept. 18, Newsom vetoed Assembly Bill 1729, authored by Assemblymember Alex Lee (D-San Jose), which sought to expand telework opportunities for state employees.

The bill would have required state agencies to offer telework options or provide written justifications for requiring employees to work in person. Supporters argued that telework could save taxpayers approximately $225 million annually by reducing office space and parking costs while lowering vehicle emissions and improving employee retention.

Newsom said the legislation would limit state departments’ flexibility to manage their workforces and evaluate telework exemptions individually. He has also emphasized the benefits of in-person collaboration.

“I want people to come back to work, reengage, rediscover, collaborate, coordinate, develop relationships, friendships, and fall in love,” Newsom said in July. “You get three-day weekends. Four years ago, that would’ve been a triumph. Now it’s a burden.”

Union organizers described the Oct. 21 walkout as a one-day unfair labor practice strike, rather than an indefinite work stoppage. The action was intended to demonstrate solidarity and increase pressure on the state during negotiations.

SEIU Local 1000 has been without a contract since its previous three-year agreement expired June 30. Negotiations are expected to resume.

Responding to the statewide walkout, the California Department of Human Resources (CalHR) said it “remains focused on achieving a fair and responsible agreement with SEIU Local 1000 and continues to be available at the bargaining table.”