Editor’s note: This story first published on April 17, 2019, but has been recirculated this week after The New York Times obtained and published information about many of President Donald Trump’s tax returns. You can find all of Mississippi Today’s coverage of poverty, class and economic justice here.
Last summer, William Ayers received a letter in the mail — it was registered and required a signature, suggesting its contents.
“Ah, that’s the IRS,” Ayers, 58, recalls thinking. “Here we go again.”
Ayers works in a Leland furniture factory, where he upholsters hospital furniture and earns roughly $27,000 a year. Across the U.S. each year, less than one percent of taxpayers — 0.77 percent — face an income tax audit.
This was the fourth time in the last two decades that the Internal Revenue Service had audited Ayers’ tax return, he said, asking for myriad documents many families don’t maintain.
Ayers said his experience is partly why it’s no surprise to him that the Mississippi Delta, one of the nation’s poorest regions, has among the highest rates of IRS income tax audits in the country.
Humphreys County — home to a town of 2,200 called Belzoni (pronounced bel-ZO-nuh), dubbed both the “Catfish Capital” and “Heart of the Delta” and where four out of ten people live in poverty — is the single most heavily audited county in the nation, according to a recent ProPublica report.
Ayers, a Greenville father of five, plus many more foster children over the years, claims the Earned Income Tax Credit, a federal end-of-year financial boost for working class families designed in the 1970’s as an alternative to welfare.
Because he qualifies for this benefit, which varies by amount depending on family size, he’s twice as likely to be audited by the IRS than people who make more than 10 times his salary, according to a ProPublica analysis of IRS data.
“It doesn’t seem right. It doesn’t seem fair. It doesn’t seem efficient from the government’s standpoint,” said Ben Wilkerson, an attorney with North Mississippi Rural Legal Services.
The only county in Mississippi where people are audited less frequently than the national average is Rankin County, the state’s second wealthiest county and where many of the state’s top leaders, including a congressman, the governor and lieutenant governor, call home. Nearly 12 out of every 1,000 taxpayers in Humphreys County are audited, compared to fewer than eight out of 1,000 in Rankin County.
Washington County, just west of Humphreys and where Greenville is located, has an audit rate of over 10 out of 1,000 and much of the same challenges, low incomes and few job opportunities, as the surrounding Delta. The populations in both Washington and Humphreys counties are also over 70 percent African American.
The IRS, through a written statement, maintains the agency enforces tax laws “with integrity and fairness to all.”
The government’s intense examination of working families who claim the earned income tax credit — designed to reward work — parallels experiences of low-income people applying for other benefits, such as food assistance, child care vouchers and cash assistance.
“It’s like they’re giving the credit and want to take it back,” said Latoya Skinner of Tax Genie, a tax preparation service in Belzoni. “You designed it for the low income (people), now you want to scrutinize them because they’re getting it.”
But there are deeper reasons why poor, rural communities may face more inquiries and, on top of that, have a tougher time answering them.
The Delta has “old school” landlords, Skinner explained, who don’t prepare leases for tenants and accept rent payments in cash. In an area lacking industry and employers, many workers conduct odd jobs for cash, enterprises with little official documentation of income.
For people who move frequently, addresses recorded with employers, schools or medical providers may not match, making it difficult to prove a child’s residency.
Add in the complexity of tax laws and low-wage workers’ acute reliance on lump sum tax returns to meet needs they’ve staved off all year, and it’s easy to see how mistakes can happen.
Ayers lives in a tidy, modest house with his wife, Dycia, and three foster kids, Kayden, Jaterrica, and Jamaine. In his living room, the walls are filled with framed computerized sketches of his kids and he built the furniture himself out of old wooden pallets.
This tax season, Ayers received a roughly $9,000 total refund, which he plans to stash away and dip into only to pay for visits with his grown children in Dallas or unexpected expenses. Otherwise, Ayers said his family lives virtually paycheck to paycheck.
The Earned Income Tax Credit lifts more than 9 million people, half of them children, above the poverty line every year. In Mississippi, consistently among the most impoverished states in the nation, one in six taxpayers who qualify don’t go after the credit.
Ayers uses black reading glasses to examine a stack of papers generated throughout his last audit. In the first letter last July, the IRS said it had found a deficiency on his 2016 taxes and he owed the federal government $9,791. He must pay the debt, it said, or file a petition in court if he disagreed with its finding.
Ayers said it was like he was guilty until proven innocent. “That’s an intimidation tactic.”
Ayers sought the help of the IRS-sponsored program, the Low Income Taxpayer Clinic, that provides free legal services to low-income workers who are audited. Wilkerson, the tax attorney whose office is in Oxford, runs the only such clinic in Mississippi.
In 2017, Ayers’ tax preparer, a relative, incorrectly labeled him as “head of household,” which is reserved for non-married people with dependents. Ayers said he had no idea why that happened. The simple mistake likely triggered the audit that put his entire filing, including the legitimacy of his dependents, under question. Like with any audit, the records gathering process was cumbersome.
Ayers requested a letter from Child Protection Services to prove his guardianship over his foster children, but the IRS rejected it because it only included the date the children were placed in his home, not specifying that they’d been in the home all year. He had to obtain a second letter.
“The biggest burden on me is the frustration, not being able to do the things you need to do with your money because you don’t know what you’re going to have to do with the IRS,” Ayers said. “It kind of puts you in a sticky situation with your money.”
Eight months later, his case is almost complete, Wilkerson said. Ayers not only no longer owes the IRS, he’s expected to receive a roughly $800 additional refund.
In past audits, Ayers did not have legal representation and was unable to produce documents proving answers on his tax return, such as his kids’ residency, so he got on a monthly payment plan to pay back thousands to the federal government.
“What I’ve seen is, if they cannot prove the audit, instead of them going for an appeal, they let it go,” Skinner said. “It’s just a lack of knowledge. They don’t realize they can appeal it. They don’t realize they can get more time and try to gather these documents.”
Some taxpayers who get audited feel discouraged and may choose not to file their taxes in the coming years, Skinner explained, meaning they’ll never get the refunds the government owes them. “They’ll just say, ‘Forget it, I’m already poor.’”
Skinner said taxpayers and even some preparers are largely uneducated about IRS processes and what documentation the agency requires. With thousands of dollars on the line, anxieties are high at the start of tax season.
The amount of this year’s Earned Income Tax Credit ranges from $529 for a person with no children to $6,557 for a taxpayer with three children.
To qualify, a filer must earn under a specified annual income, from $15,270 to $54,884 depending on the filer’s marital status and how many children are in the home. The taxpayer must then produce a series of records to prove their relationship to their dependent and their dependent’s residency, such as birth certificates, school, medical, daycare or social service records or official letters from those entities.
Skinner said some common filing scenarios send up red flags to the IRS, such as when two separated adults claim their child as a dependent in two different homes or when someone other than a parent, such as an aunt, uncle or grandparent is a child’s primary caretaker.
Because the credit only increases in amount up to three children, Skinner said, a parent might allow their relative to claim their fourth or fifth child as a dependent. That other adult might have legitimately assisted with the family’s expenses, so the tax filing feels honest, Skinner said, but a taxpayer is not supposed to claim a dependent unless the person lived in their home.
If a taxpayer took care of a dependent and therefore earned the benefit, but lacked documentation to prove it, they’re technically ineligible. Some lose out on money they earned simply due to poor record-keeping.
“If the people knew, they probably would do better. And some of them probably still won’t do better,” Skinner said.
Tax return errors are not limited to the legitimacy of dependents. Every year, people visit the Tax Genie asking to file their taxes using their last pay stub before they’ve received a W-2, the document employers send both the IRS and employees, which reflects their official annual earnings. This can lead to discrepancies between the taxpayer’s filing and paperwork the IRS already possesses.
“They’re depending on their taxes, so as soon as the IRS open up the gates, they’re running to somebody who can use a last check stub,” Skinner said. “And if you say you don’t know how to do it, they’re going to go get on the computer and they’re going to put it in themselves.”
Wilkerson said some preparers may also be tempted to tweak numbers in their clients’ returns to maximize the amount they get in earned income credit, especially if they receive a commission on the refund.
Belzoni Mayor Carol Ivy told Mississippi Today she chalks up Humphreys County’s high audit rate to tax fraud in the area. “It’s everywhere … The people are not truthful with their income tax. They’re not,” Ivy said.
Wilkerson takes issue with the mayor’s characterization: “Fraud is kind of a strong word,” he said. “I would say it’s more optimistic thinking.”
At the same time, Ivy said it doesn’t make sense that the U.S.’s poorest taxpayers should face more audits than folks earning several hundred thousand dollars a year. “Everybody should be audited,” Ivy said.
Any of these scenarios are compounded by the existing conditions of a community where the average household earns $23,000 and the unemployment rate of 10.2 percent is more than double the statewide average.
Skinner estimates half the taxpayers in the area are self-employed, which includes the operators of the car wash down the street from her office.
Residents’ low earnings also sometimes cause suspicion, Skinner added.
“I’ve even been told by an IRS examiner before, ‘How are they head of household with this little money?’” Skinner said.
Take a single parent raising her children with an annual income of $5,000. Skinner points out that $5,000 is enough to pay $350 in rent every month for a year, which may satisfy half the household’s expenses, qualifying them as the head of household.
Skinner said in this way, the IRS discriminates against communities it doesn’t understand.
Mississippi Today asked the IRS for an interview to discuss how the agency ensures its inquiries do not target low-income or minority populations. In a written statement, the IRS said its process for selecting who to audit “is designed to select returns with the highest likelihood of noncompliance” using a “systemic risk-based scoring criteria.”
“(F)airness and integrity are built into the foundation of our return selection process,” the statement reads. “The selection criteria does not include any components or factors related to the geographic location or ethnicity of the taxpayers.”
Ayers looks at the IRS audit trend through the lens of his family’s history. His father, Jake Ayers, helped organize during the Civil Rights Movement and even brought the successful suit against the state board of education over Mississippi’s segregated public university system in the late 1980’s.
It’s easier, he said, for him to connect the dots.
“Minorities, low-income people, I feel like they’re always getting a raw deal from the government and government officials,” Ayers said. “They’re easiest to step on. They’re more vulnerable than other people.”