IRS advised to focus audits on the super wealthy
Audits are one of the main forces that keep Americans honest on their income tax returns. But did you know that not every American faces the same risk of being audited?
The IRS’s strategy is directly tied to income. If you earn less than $200,000 a year, then you have less than a 1 percent chance of being audited. However, people with incomes of $10 million or greater faced a one in six chance of getting audited in 2014.
The reason the IRS zeros in on wealthy taxpayers is because these individuals are more likely to manage their money using complex arrangements, the Washington Post reported, which makes it easier to hide money. Additionally, the IRS gets a much heftier return when it busts a super wealthy person for unpaid taxes compared to a person who earns much less.
For example, the Washington Post reported that while the IRS collects every about $605 per hour auditing someone who earns $200,000 in income, it collects about $4,545 an hour by auditing someone who earns $5 million in income.
The data was highlighted in a new report from the inspector general, which advises that the IRS should further target its auditing practices based on wealth.
The report stated that since there are many more taxpayers who earn between $200,000 and $399,999 each year, auditing these individuals is much less productive than auditing the super wealthy.
A spokesman for the IRS said the agency would be reviewing its current auditing practices with the inspector general’s advice in mind. However, the spokesman added that all Americans need to fear a potential audited — regardless of their incomes — to make sure people are complying.
What to do when being audited
Being audited can be very stressful and scary, especially since the IRS can use aggressive tactics such as garnishing your paychecks, levying your bank account or putting liens on your properties. For this reason, many people turn to an experienced tax attorney for assistance.
Your tax lawyer can work directly with the IRS and help you get a plan in place to settle, appeal or defer the tax debt you are accused of owing.