IRS is Scrutinizing Tax Returns of Wealthy Individuals
Those who prepare tax returns for wealthy individuals should be especially careful this year, experts warn as next month’s 2007 filing deadline approaches. That’s because the chance of being audited is much higher than it was even a few years ago.
The Internal Revenue Service has reported an 84 percent increase, last year, in the number of audits for individuals making $1 million or more. During the 2007 fiscal year, their chance of being audited was 1 in 11.
“There is a clear trend that the higher an individual’s income, the more likely they will be audited by the IRS,” warns attorney Robert McKenzie, a partner of Chicago-based Arnstein & Lehr, in a press release.
“The IRS also increased its efforts to prosecute more taxpayers for criminal tax violations during 2007,” the law firm states in the release. “Those who aggressively under-report their income or claim improper deductions and expenses may become the target of the IRS criminal investigation special agents.”
A partner in a Los Angeles forensic accounting firm has issued a similar warning. While audit rates have risen “dramatically” in recent years, however, it isn’t yet clear whether this trend will continue under a new IRS commissioner after last spring’s resignation of enforcement champion Mark Everson, says David Nolte of Fulcrum Financial Inquiry in his firm’s press release.
Only about 1 in 100 taxpayers is audited among those making $100,000 or less, according to Nolte.
