IRS Asked to Start Collecting More Demographic Information
The IRS is being asked to provide more information about the race, ethnicity and sex of taxpayers but is facing legal restrictions, according to a report recently released by the Government Accountability Office (GAO).
Currently, the IRS only collects demographic data explicitly referenced in the Tax Code necessary for administering the Code. The report said that due to these legal restrictions, analysts have limited ability to assess the effects of tax laws by demographics such as households' race, ethnicity and sex, and Congress should consider changing the relevant laws to allow secure interagency data sharing. The report identified options for linking taxpayer and demographic data, such as surveys and interagency data matching.
Currently, the Treasury Department is developing an imputation method that could enable the IRS to collect and share demographic data. This method would provide a kind of estimation. For example, name and geographic data from administrative and survey data sources could be used to determine the probability of a surname and geographic location being associated with a race. Those probabilities would then be used to correlate race information with data lacking that information. However, this method can introduce errors in the missing data and also introduce bias into the data. Due to these issues, the GAO report recommended the Treasury evaluate other options to produce secure, linked taxpayer and demographic data. In response, the Treasury stated that it has considered other options and will continue to focus on developing the imputation method.