The IRS is Targeting High-Income and High-Wealth Taxpayers in Virginia

The Internal Revenue Service (IRS) is targeting high-income and high-wealth taxpayers in two ongoing enforcement initiatives that have netted the agency $1.3 billion over the past year. These initiatives involve auditing taxpayers suspected of non-filing or non-payment (or both), and the IRS is relying on additional resources to pursue these audits as quickly as possible. Should you be concerned, and if so, what should you do? Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.

IRS Enforcement Initiatives Focused on High-Income and High-Wealth Taxpayer Compliance

To be clear, anyone who has concerns about federal tax compliance needs to make compliance a priority. Interest and penalties begin accruing immediately, and if you willfully fail to correct a filing or payment error, you can be charged with criminal tax evasion or tax fraud. So, if you are a high-income or high-wealth individual and you have any concerns about federal tax compliance, you should speak with an experienced Virginia tax lawyer as soon as possible.

With that said, the IRS is currently focused on targeting high-income and high-wealth taxpayers in two main categories:

• Those who have not filed returns in the past eight years and who have income of $400,000 or more; and,
• Those who have income of $1 million or more and recognized tax debt of $250,000 or more.

If you fall into either of these categories, you are at particularly high risk of being scrutinized by the IRS. If the IRS initiates an audit before you take corrective action, you could be liable for substantial back taxes, interest and penalties. As noted above, if the IRS finds evidence to suggest that you have willfully avoided your federal tax obligations, you could face criminal charges as well.

Common Issues in Audits Targeting High-Income and High-Wealth Taxpayers

When auditing high-income and high-wealth taxpayers, the IRS examines these taxpayers’ returns and records for evidence of any and all forms of underreporting and underpayment. Some examples of common issues in these audits include:

• Failure to disclose all sources of income
• Failure to disclose offshore accounts or other offshore assets
• Claiming improper deductions, credits or exemptions
• Improper use of conservation easements and other tax mitigation strategies
• Use of tax avoidance schemes that violate federal law

As a high-income or high-wealth taxpayer, making informed decisions starts with understanding the nature and scope of any issues the IRS may uncover during the audit process. If you are aware of any issues (or should be aware of any issues), addressing them proactively through a voluntary disclosure or other means may be the best approach. While there are options for mitigating your exposure, many of these options go away once the IRS opens an inquiry.

Speak with Virginia Tax Lawyer Kevin E. Thorn in Strict Confidence

If you have concerns about your exposure in the event of an IRS audit, we encourage you to contact us promptly for more information. To speak with Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, in strict confidence, please call 703-752-3752 or contact us online today.