What You Need to Know About Why the IRS is Cracking Down on Wealthy Taxpayers
Squeezing Dollars Out of Audits
The IRS has been conducting less and less audits as it’s in the process of recovering from years of budget cuts. Despite its shrinking number of employees, the IRS is always looking for more ways to get money into the US Treasury. That’s why for tax season 2017, the IRS is trying to find ways to get more money out of wealthy taxpayers through audits, audits and more audits. If you’re a wealthy taxpayer (you know who you are), then you need to watch out for the IRS this tax season. They won’t accept any funny business, and are starting to crack down on the rich more than ever.
A Call for Transparency
The IRS is not messing around when it comes to people hiding their money or under-reporting their tax burdens. Wealthy people and those who are the heads of wealthy companies can expect some extra scrutiny from the IRS this tax season. Especially if you are someone with a complicated tax situation, you’re going to want to talk to a tax attorney asap to avoid any tax controversy that will only lead to a headache.
Targets to Watch Out For
The IRS is already starting on their new strategy that involves mass notices addressing taxpayer’s specific issues rather than jumping into a full blown audit. These specific issues are really what the IRS is looking for and targeting. Let’s take charitable donations for example. If you are someone who reported an especially large charitable donation on your 1040 form, the IRS has computers that are programed to flag this activity and automatically send you a notice asking for proof of the donation. Like we said, they aren’t messing around.
Other specific issues that the IRS is targeting include:
- Large losses
- Mortgage interest deductions
- 529 college savings plans
- Hobby losses
- Losses from a business venture
Losses from a business venture is high up on the target list for the IRS this tax season. Especially because a lot of rich people have been known to claim losses for a business venture that, in the eyes of the IRS, was never supposed to make any profit. Things like a band, a yacht, or racing cars are just some of the things wealthy people like to claim. The IRS is also looking at repatriation, which is when taxpayers bring money from abroad back to the US.
For most of these targets, the IRS has said they are going to send out letters to the taxpayers they are watching letting them know that they are under scrutiny. If the situation gets out of hand though, the IRS will investigate with a full on audit as they see fit.
What to Do If the IRS Audits You
The first thing is, don’t panic. The second thing you do is call a tax attorney you can trust. But remember, just because the IRS sends you a letter in the mail, doesn’t mean your entire financial life is ruined. More often than not, they will send a notice to your house asking you for proof of your credits and deductions. If you can prove this to them, send off the correct paperwork in a timely manner, and not make a fuss
On the other hand, if you neglect to comply with the IRS or take too much time getting your stuff together, you start to look suspicious. So make sure that if you receive one of these notices from the IRS you act swiftly and honestly. In reality, the average person shouldn’t have to worry about getting any notice because the IRS is mainly focusing on really wealthy people and large corporations for the 2017 tax season.
In fact, the IRS even has something that’s known as the Wealth Squad. More formally its name is the Global High Wealthy Industry Group. Their job is to investigate the finances of the wealthiest taxpayers this country has to offer. With a team of highly trained agents, they will investigate every rich person’s finances, companies and investments that they own. If you’re lucky enough to be categorized in this class of people, it’s best to be careful where you’re putting your money and take precaution to have proof to back up all credits and deductions.
If you feel as though the IRS might target you and your finances during tax season 2017 or you’ve already received a letter from them, call a tax attorney at The W Tax Group today. We will help you with your biggest tax controversy and find the perfect tax resolution for you.
Lead Tax Attorney, The W Tax Group