by Brian Mahany
IRS on a “Rampage.” That’s the term used by one very popular news source. According to data just released from the IRS, the percentage of high net worth individuals audited last year was 29.73%. Just 2 years ago, that number was at 10%. For the general population, just 1% gets audited per year. When you consider that now half the population isn’t even required to file income tax returns, the true percentage becomes even more significant.
The IRS defines high net worth to mean taxpayers earning more than $10 million per year but the audit rates for all categories of higher earners is up.
In 2009, the government created a special unit to examine individuals making more than $1 million. The unit was created just after similar audits under the Bush administration were reported to fall by 19%.
While the IRS is supposed to be immune from politics, the current political winds are such that big earners need to be concerned about being audited and insuring that all their paperwork is in order.
Facing an audit isn’t the end of the world for most people but those with unreported income, inflated deductions or unreported foreign bank and brokerage accounts need to be especially concerned.
Revenue agents are now working more closely with IRS criminal division special agents. Many criminal tax prosecutions start after an audit goes bad. Much discretion is given to the agent. If he or she believes any errors were inadvertent, the worst that happens is additional tax, interest and penalty. A criminal referral, however, can wreck anyone’s day.
If you are a high net worth individual and you know you may have problems, don’t wait to get caught. The IRS generally follows a first contact policy meaning that is always better to come forward instead of trying to bargain or amend returns once you receive an audit notice.
The tax lawyers at Mahany & Ertl concentrate in a wide variety of tax matters including audit defense, responsible individual assessments, tax amnesty, foreign tax reporting (FBARs and FATCA) and criminal tax investigations. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at . All inquiries are kept in strict confidence and covered by the attorney – client privilege.
Mahany & Ertl – Giving Taxpayers A Voice. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. IRS services available worldwide.