Very few things are able to strike fear in the hearts of American taxpayers as much as a notice from the IRS that they are being audited.
Not everyone is at equal risk of being audited. According to recently released Internal Revenue Service data, millionaires are far more likely to become the subject of an IRS tax audit.
Last year, the IRS audited approximately one out of every eight taxpayers who earned more than $1 million in income. Only one in 100 taxpayers earning less than $200,000 faced the same attention.
The IRS says the higher audit rate for millionaires is part of a conscious effort to promote equity in the system and ensure that wealthy Americans are following the same tax rules that apply to the rest of the country.
The agency denies that its focus on millionaires’ tax returns is part of President Obama’s effort to boost taxes on the wealthy to pay for government programs. IRS spokeswoman Michelle Elridge told the Christian Science Monitor that “the IRS is an agency of civil servants, and we base our audit decisions on tax issues – nothing else. We don’t play politics here.”
Audits Are a Significant Source of Revenue
Audits and other enforcement efforts bring in big money to the IRS. Last year, the agency collected $55 billion through tax enforcement activities.
Audits are serious business. At best, they can result in a higher tax bill – in 2010 more than 80 percent of audits resulted in increased tax liabilities. If the taxpayer has been intentionally dishonest, the penalties can be much worse.
If you are audited, you have a right to contest the findings. Contact a Boston tax defense attorney who can help you understand your options.
Source: Christian Science Monitor, “IRS 12 Times More Likely to Audit Millionaires Than the Rest of Us,” Alan Fram, Jan. 5, 2012.