According to a recent CNN report, IRS rates for millionaires jumped up again this past year. Those making more than $10 million dollars have an eighteen percent (18%) chance of audit.This represents a seventy-three percent (73%) increase from last year and 18 times the rate seen across all incomes.
Significantly, audits do not necessarily mean the IRS will collect more money.Many audits can drag out for years and often the taxpayer ends-up owing nothing.This means the IRS must gauge how much money its new enforcement efforts will bring over the next few years and then, make a decision whether the new strategy is working.It can reasonably be expected, however, that the IRS will continue ramping up audits of the wealthiest Americans if a significant amount of money is collected as a result.
Thomas Cooke, professor of accounting and business law at Georgetown University said “It’s fine and dandy for the IRS to say this is how many audits we’ve given to the wealthy, but we’ll have to get some more data on how much they collect, and the proof will be in the outcome.” In the end, whether the IRS collects money from increasing the number of audits targeting the wealthy or not, one thing is for sure.The threat of an audit will have a chilling effect on other wealthiest of American taxpayers and the increasing level of scrutiny is likely to have a positive effect on self-reporting amounts and collection efforts.
Millionaires facing an audit would be well-advised to retain a tax lawyer.Having the assistance of competent counsel during the audit, and afterwards to negotiate any possible settlement of back taxes uncovered through an audit, is a good way to help ensure a fair and just outcome.A tax lawyer can also be instrumental in advising a millionaire client how to avoid IRS wage garnishments, IRS liens, IRS levies and a host of other IRS collection techniques.A smart tax lawyer can also provide detailed information to a client about whether the client may qualify for an offer in compromise or some other arrangement to settle back taxes owing.
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