There has been a tremendous rise in IRS audits on high net worth individuals earning between 5 and 10 million a year, and a greater jump in audits for those earning over $10 million per year.
In 2009, the IRS created a special unit to examine the tax returns of high net worth (HNW) individuals to better assess the risk such arrangements pose to tax compliance and the integrity of the tax system.
The Internal Revenue Service in 2011 audited 29.93% or nearly 1 in 3 taxpayers who reported more than $10 million of income, according to statistics released today.
That’s up from an audit rate of 18.38 percent in 2010 and 10.60 in 2009. Overall, the agency’s rate of tax audits for individual taxpayers stayed constant at 1.11 percent.
The statistics cover audits conducted in fiscal year 2011, which generally corresponds to tax returns filed during 2010.
For U.S. taxpayers with adjusted gross incomes between $5 million and $10 million, the audit rate rose to 20.75 percent from 11.55 percent. People making between $200,000 and $500,000 were audited at a 2.66 percent rate.
Read more at Bloomberg News via Investment News