As we move into fall, many individuals who sought an extension are continuing to work on tax issues. Similarly, business owners often look to begin to reconcile the books at this time of year and adjust strategies to push to make year-end goals. Many decisions made during the fall tax season are aimed at reducing income tax exposure during the following calendar year. The importance of remaining mindful of the tax implications of decisions made today (and everyday) cannot be understated.
As Income Increases, So Does The Risk Of Audit
In August, we discussed the likelihood of facing an IRS audit, which is not static across the spectrum of income levels. As income, assets and business interests increase, the likelihood of being audited increase. In fact, roughly nearly one out of every four individuals who reported an adjusted gross income of $10 million or more was audited in 2013, according to Bloomberg.
What may seem even more unnerving is that since 2010 the IRS has had an elite squad of specialists, technical advisers and examiners that focus on high-income individuals. The team includes industry specific specialists and economists who evaluate trends to uncover tax-related issues.
The team is generally known as the Global High Wealth Industry Group, but has also been called the Wealth Squad. The team not only looks at the individual income tax returns of high wealth individuals, but related returns of entities “where the individual has a controlling interest and significant compliance risk is deemed to exist,” Bloomberg reports. These are highly intensive audits.
It is always better to be prepared from the start to avoid tax issues. Working with experienced lawyers and CPAs who have a strong command of tax laws is critical in protecting financial stability. Moreover, developing a relationship with skilled tax lawyers who have the ability and resources to maintain representation if an audit occurs is an important strategy to protect your rights.