The algorithm creates racist results

The Internal Revenue Service has up and admitted that it has been auditing Black taxpayers at a much higher rate than others. 

... Commissioner Daniel Werfel told lawmakers Monday, confirming earlier findings by researchers at leading universities and the Treasury Department.

... Tax examiners do not know the race of the people they are auditing, but the algorithms the IRS uses to monitor fraud around the earned income tax credit — one of the U.S.'s largest social safety net programs — target filers that make errors on their returns and do not report business income. The result, the researchers found, is that the algorithms are more likely to identify Black taxpayers for audits.

There is no evidence that Black taxpayers perpetrate fraud at a higher rate than any other demographic.

... “While there is a need for further research, our initial findings support the conclusion that Black taxpayers may be audited at higher rates than would be expected given their share of the population,” Werfel wrote. Washington Post

This insight has been around for years, first highlighted by the journal Tax Notes and later amplified by ProPublica in 2019.

The study estimates that Humphreys [Miss.], with a median annual household income of just $26,000, is audited at a rate 51 percent higher than Loudoun County, Virginia, which boasts a median income of $130,000, the highest in the country.

Click to enlarge. Darker is more audits.

Yes, there is such a things as systemic racism. We practice it in the tax system.

And note that the GOP wants to claw back the funds appropriated in the Inflation Reduction Act to staff up and modernize the I.R.S. After years of budget cuts instigated by Republicans, no wonder the agency turned to computer prompts to choose which tax payers to audit.  Rich people are so much better at hiding any deviation from the tax rules. But rich people are where the money is.