According to IRS attorneys, earlier this year the IRS reported its audits of 18.4% of
2010 tax returns filed by taxpayers with adjusted gross incomes (AGIs) in excess of
$10 million dollars. IRS tax lawyers say that is an increase of 10.6% over 2009. For
taxpayers with AGIs between $5 and $10 million dollars in 2010, the number of audits
increased by 55% over 2009.
IRS attorneys point to the Agency’s aggressive offshore bank account investigations
and its newly formed Global High Wealth Industry group as part of the reason for the
increased number of audits. During a meeting of the New York State Bar Association’s
Taxation Section, IRS Commissioner Doug Shulman told the IRS tax attorneys in
attendance “We’re looking for and finding points of leverage, also called ‘nodes’ of
activity, where multiple people not paying taxes can be detected. Financial institutions
are one such potential node of activity. Promoters of evasion schemes are another.”
With a centralized and focused IRS compliance expertise involving high net worth
individuals the Agency’s Global High Wealth Industry group is just one of several IRS
initiatives prompting more audits, say many IRS attorneys. Another factor prompting
more audits according to several IRS tax lawyers is improvement of electronic systems
and upgrades designed to capture more mistakes and collect more back taxes.
The IRS tells taxpayers that it may correct math errors and accept returns with certain
forms or schedules left out, so don’t file an amended return if you make a math error
which doesn’t change the amount you owe. But, IRS tax attorneys suggest, and the
IRS agrees that if your original return had mistakes regarding your filing status, income,
deductions or credits you should file an amended return to correct the errors.
If you end-up making a mistake which affects the amount you owe, and are hoping it will
go unnoticed, IRS attorneys say the chances are you will be caught and the penalties
and interest will likely be substantial. What’s more, IRS tax lawyers warn that if you owe
back taxes and are unable to pay, new electronic systems employed by the IRS will
make its collection efforts much more efficient. In addition to IRS liens, you may also
be subject to IRS wage garnishments and IRS levies.
So don’t stick your head in the ground hoping your tax troubles will all go away on their
own. With increasing audits, more electronic efficiencies the IRS is particularly focused
on getting any back taxes owed sooner, rather than later.
Segal, Cohen & Landis 9100 Wilshire Blvd. Ste. 601E Beverly Hills, CA 90212 (310) 285-3999