As many taxpayers have learned the hard way, no one is safe from the IRS. Even innocent mistakes can create a tangled web of IRS problems—including penalties, interest, and more penalties.
While there is no income bracket that is safe from IRS scrutiny, in recent years the IRS has begun to focus specifically on “high wealth” individuals. A recent article on Motherjones.com examines this policy shift.
The article uses presidential candidate Mitt Romney as an example, but the focus of this increased IRS scrutiny isn’t just on multi-millionaires and billionaires, it’s on all high-income earners:
“In 2009, IRS Commissioner Doug Shulman announced that the IRS had created a new task force to audit people he called “global high-wealth individuals.” These new IRS targets, Shulman explained, have tens of millions of dollars in income and assets and “make use of sophisticated financial, business, and investment arrangements with complicated legal structures and tax consequences.” They often have an intricate web of related business entities like S-corporations and other pass-through entities they control, along with various off-shore accounts and business entities.
There aren’t that many people in the “global high-wealth individual” group—only about 8,000 taxpayers a year who have more than $10 million in annual income—and Romney is “exactly the kind of taxpayer the program was designed to look at,” says Rebecca Wilkins, a lawyer at the Center for Tax Justice who used to work with rich clients as a CPA. It’s possible for someone with a lot of income, like a corporate CEO, to have a fairly simple tax return, Wilkins says. But Romney’s return from 2010 (the only completed one he’s released so far) weighs in at 203 pages; 55 pages are simply devoted to disclosing the existence of a host of foreign transactions in tax havens like the Cayman Islands.”
What does this mean for you? It means that, particularly if you’re a “high income” earner, the IRS is going to devote time and resources to searching your returns for any possible mistakes. And it means that if they find any issues, even innocent mistakes, you can expect to get slammed with fines, penalties, and interest. Be forewarned!
If you would like to learn more, or if you’re already dealing with an IRS dispute and need help resolving it, please get in touch with us today!
Additional Readings
Getting a notice that you’re facing an IRS audit can be unnerving, to say the least. Last year, 3.8 of every thousand tax returns were audited. An IRS audit is something no one wants to face, but it’s always a possibility. Even if you’ve followed every rule for filing your taxes and think you have accurate returns,...
We have compiled this comprehensive guide to help businesses understand their obligations related to sales tax in the state of Kansas. The guide covers various topics, including what items are subject to sales tax, how to register and file sales tax, and how to collect and remit sales tax. In addition to providing information on...
We’re in an era in which more small businesses are launching like wildfire. Recent studies showed that 17 million new small businesses were expected to launch in a single year. Small businesses are the backbone of the economy. But they’re often more tumultuous, have fewer resources, and are run by less experienced professionals. If you...
April 18 is fast approaching. That’s the official deadline for filing your 2022 federal tax return. As you gather your documents and assemble your information, it’s important to know about recent changes that have occurred. This year, the Internal Revenue Service (IRS) adjusted many of its 2023 tax rules. While you’ll still follow 2022 rules to...
Sales tax is paid to a local or state governing body for the sale of certain services and goods. In Oklahoma, the state sales tax is 4.5%, which is charged on sales of certain services and tangible personal property. Along with the state sales tax, local sales taxes and special district taxes may apply. Business owners...
If you have been struggling to pay the bills or your taxes, you may receive a notice that a garnishment or levy has been placed on your wages or bank account. Even if you make every effort to pay your back taxes, your circumstances may make paying your taxes difficult, such as a job loss...