by Brian Mahany
Here is a shocking headline… the General Accounting Office recommended the IRS devote more of its enforcement and audit efforts to those taxpayers earning more than $200,000 per year. That means the average middle or upper class earner will have an even higher chance of being audited.
According to the GAO study, the IRS makes about $6 for every $1 spent auditing lower income taxpayers. That amount jumps to $26 for middle income folks earning $200,000 or more. The wealthy – those earning more than $1 million – result in an audit rate of return of 47 to 1.
With statistics like that, it is easy to see why the GAO wants the IRS to go after those earning more money. The flaw in the logic, however, is that the middle and upper income taxpayers are already facing a disproportionate increased risk of being audited. The IRS already spends 20% of its enforcement dollars on middle and upper income returns even though these returns only account for 3% of the returns filed.
It’s legal class warfare.
As state and federal governments grow more desperate for money, expect audit efforts to dramatically increase. If selected for an audit, don’t ry to defend your position on your own. Instead, hire a good tax lawyer or accountant. If you have unreported offshore accounts or if you think the IRS will be able to prove fraud or willful conduct, then go straight to an experienced tax attorney. Unfortunately, there is no accountant – client privilege like there is with lawyers.
Unfortunately, the IRS can and often does subpoena your accountant. They can be forced to testify against you. For that reason, if you are facing possible criminal prosecution, make sure you have an experienced tax lawyer helping you. Often your attorney can hire back your own accountant but all while placing the accountant under the lawyer’s privilege.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and coming soon, San Francisco, California. IRS related legal services available worldwide.