The Eye of the IRS is on the Wealthy

March 17, 2010

With the decline in revenues for the federal government, it should come as no surprise that the focus on generating tax dollars is focused on wealthy Americans. In November, we informed readers of a new IRS initiative to uncover tax evasion by higher income individuals was being launched. Another sign of the increased scrutiny is seen in recently released figures by the IRS, which appeared in The New York Times. The figures show that the IRS increased its audits of taxpayers who earned $1 million to $5 million by 33% in 2009 compared with 2008. For those earning $5 to $10 million audits increased by 16%, and for those with earnings of at least $10 million audits rose by 8.5%.

This strategy seems to have paid off as the IRS reported that it collected more than $1.9 trillion in taxes, net of refunds, during October 1, 2008 to September 30, 2009, in which it processed more than 236 million returns.

Not included in the statistic is the more than 206,000 cases examined by the IRS in which no return was filed. These non-filer cases were referred for examination by the Collections Program and the Automated Substitute for Return Program (ASFR). In the ASFR Program, IRS uses information returns (such as Forms W-2 and 1099) to identify persons who failed to file a return and constructs tax returns for certain non-filers based on that third-party information. 

Taxpayers who earned at least $1 million a year made up 0.25 percent of the more than 144 million individual federal returns filed last year.

As the tax filing date draws near, please remember the above and contact your PerelsonWeiner partner with any questions.

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