The Internal Revenue Service (IRS) may have a new focus during its next set of audits: the wealthy. The agency recently announced an initiative that focuses on taxpayers with high wealth.
Who will the IRS focus on during these audits?
It appears the agency will focus on a specific group of the wealth population. Two areas of focus are taxpayers with connections to:
- Pass-through entities
A recent analysis by Forbes notes investigators from the IRS will likely focus on a taxpayer’s use of Section 199A, a portion of tax code changed by the Tax Cuts and Jobs Act. This law resulted in a change that caused many taxpayers to restructure their holdings.
What led to this push for audits?
The agency was likely encouraged to shift its focus and increase audits of the wealthy after it was the subject of a not so favorable report by the Treasury Inspector General of Tax Administration (TIGTA). According to the TIGTA, the IRS was missing out on billions in tax revenue by failing to adequately audit the rich.
What should taxpayers learn from this report?
The IRS will likely increase audits for those who have a connection to pass-through entities and partnerships. It is important to take any notification from the IRS seriously. Those who receive notification of a federal tax audit have options. An attorney experienced in this area of tax law can review the notification and discuss these options, as well as advocate for your interests during the audit process.