IRS to Crack Down on Top Earners Who Haven’t Paid Taxes
The IRS is ramping up its efforts to collect unpaid taxes from high-wealth individuals and large corporations. The agency is working to reverse historically low audit rates for these groups, with the audit rate for taxpayers earning $1 million or more dropping from 7.2% in 2011 to 0.7% in 2019.
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Increased Scrutiny Areas
Here are some of the areas the agency could scrutinize more heavily, according to tax experts:
+ ‘Significant emphasis’ on partnerships
Partnerships will be under significant emphasis, particularly “tiered partnerships” that can provide an “opaque way” of hiding income.
They’re looking to use data analytics and artificial intelligence in ways they have not previously.
Colin Walsh
Principal and practice leader at Baker Tilly
+ Other ‘red flags’ for higher earners
The IRS is also watching for other “red flags” from higher earners, such as residency in Puerto Rico, international tax evasion, cryptocurrency, and estate and gift tax returns using “aggressive valuation discounts” for assets.
IRS Focuses on Partnerships and Red Flags for High-Earners
The IRS is intensifying its efforts to collect taxes from high-wealth individuals and large corporations. The audit rate for taxpayers earning $1 million or more dropped from 7.2% in 2011 to 0.7% in 2019. Here are some areas of increased scrutiny by the agency:
The agency will be focusing on partnerships, particularly “tiered partnerships” that can hide income through an “opaque way.” Data analytics and artificial intelligence will be used more extensively than before.
The IRS is also watching for red flags from higher earners, such as residency in Puerto Rico, international tax evasion, cryptocurrency use, and aggressive valuation discounts on estate and gift tax returns.
Closing Thoughts 🚀
If you fall into the category of high-earners or have complex financial structures, it’s essential to stay updated with IRS regulations and ensure your taxes are filed accurately. The IRS is stepping up its efforts to close the tax gap among top earners, so make sure you’re prepared!
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