IRS Audits of Millionaires on the Rise
The IRS recently released statistics related to the number of taxpayer audits in 2011. If you expect to report earnings of $1 million or more on your 2011 federal income tax return, you should pay attention.
According to these statistics, 12% of individuals earning at least $1 million annually were audited in 2011, which represents a 50% increase from 2010 and a 100% increase from 2009 figures. IRS officials stated that the increase in the number of audits of high-income individuals is designed to demonstrate that the tax code is being enforced fairly and “assure that those at the lower end of the spectrum know that those at the higher end of the spectrum are subject to the same rules and enforcement as everyone else.”
Audits of individuals earning at least $200,000 increased in 2011 as well, with one out of every twenty-five of these individuals being subject to an audit, up from an average of approximately 3% over the last five years. Overall, just over 1% of all individuals filing federal income tax returns were audited in 2011.
The results of the recent audits generally have not been favorable to taxpayers. In 2010, the most recent year for which statistics are available, more than 80% of individuals subject to an audit were required to pay additional taxes, often along with penalties and interest. Overall, audits in 2011 resulted in the IRS collecting an additional $55 billion, which actually represented a $3 billion decrease from 2010.
The following statistics are also noteworthy:
- 1% of corporations with assets under $10 million were audited. Among corporations with assets of at least $250 million, 28% were audited.
- In 2011, the IRS garnisheed wages or seized money from bank accounts 3.7 million times, placed liens on property 1 million times and seized 776 pieces of property.
- The information IRS officials dispensed to taxpayers over the phone was accurate 93% of the time, the same as the previous year.
If you are subject to an IRS audit, whether it will be conducted through the mail or via a face-to-face meeting with a revenue agent (which is required one-fourth of the time) it is essential that you consult with an attorney to protect your interests and minimize, or even eliminate, your potential exposure.