IRS Audits of Wealthy Individuals
As many people have read, the Internal Revenue Service has been adding staff resulting in a significant increase in audits of individuals with earnings over $500,000. This is consistent with a recently published Wall Street Journal article indicating individuals with earnings between $500,000 and $1,000,000 had a 3.37% chance of being audited (up from 2.77%). The likelihood of an audit increases as earnings go up, and it was reported those with earnings over $10,000,000 had an 18.38% chance of being audited (up from 10.6%).
For those selected for audit, our experience indicates these audits are anything but superficial. In addition to requesting documentation to substantiate deductions, the IRS often requests financial records to confirm the taxpayer has reported all earnings. Gathering and providing this information is a tedious and time consuming process. These audits are most efficient when responded to in a timely and organized manner. Although many audits result in “no change” in the amount of tax due, the audit process itself can be stressful. Let us know if we can help you through this process.