Tags: irs | tax | high-wealth | audit

Report: IRS High-wealth Audits Show Little Gain

Tuesday, 10 April 2012 03:53 PM

The U.S. Internal Revenue Service collected $48 million in 36 audits completed under its Global High-Wealth initiative, according to a report by the Transactional Records Access Clearinghouse at Syracuse University in New York.

The report, which uses internal IRS reports obtained through a court order, said that 12 of the 36 finished audits resulted in no additional taxes being imposed.

“We’re now 2½ years into the program and have very little to show for it,” said Susan Long, co-director of the research center and a statistician at Syracuse University. “It does seem to be rather surprising. And they’ve become very silent this past year about it.”

Terry Lemons, an IRS spokesman, said the agency disputes the findings. Taxpayers with incomes over $1 million have much higher audit rates than the rest of the population, he said.

“We do have a lot going on,” he said. “They do not paint a complete picture of what’s going on.”

Lemons said that looking at completed audits is misleading because cases with no recommended changes are typically the ones that are finished quickly. Other cases are complex and can take more than a year to complete, he said.

The IRS is examining more than 100 enterprises under the program, encompassing more than 500 tax returns, Lemons said. The unit is in the early stages of looking at another 200 individuals, he said.

Highest-Earning Taxpayers

The IRS announced the Global High Wealth program in 2009 in an effort to examine the interconnected businesses of the highest-earning U.S. taxpayers.

In a 2009 speech, IRS Commissioner Douglas Shulman said the group would look at people with tens of millions of dollars in assets or income.

“We want to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise,” he said. “We cannot do this by continuing to approach each tax return in the enterprise as a single and separate entity. We must understand and analyze the entire picture.”

Because top earners sometimes file multiple returns associated with their businesses, the 36 audits completed in the program may represent only 12 to 18 people, the report said.

Audits in the high-wealth program are labor intensive, according to the report. The 101-person unit spent an average of 262 hours per audit in fiscal year 2012, according to the report. That’s more than 16 times the time spent on a typical audit of a taxpayer with $1 million in income, the report said.

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Tuesday, 10 April 2012 03:53 PM
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