Alert - IRS Increases Its Audits of Millionaires

For taxpayers that earn more than $1 million annually, the odds of being audited by the Internal Revenue Service have increased. According to MSN Money, new IRS figures report that the number of millionaire earners who were audited last year has increased to 12%. The IRS has stated that the increasing audit rate goes to show that the tax code is being enforced fairly, and it is not related to President Obama’s recent proposals to increase taxes for the wealthy.

For taxpayers earning under $200,000, the chances of being audited has remained stable at around 1%. Those earning $200,000 and up have experienced a slight increase – 4% were audited last year as compared to 3% in 2010. Out of the 141 million individual returns reported last year, the IRS audited almost 1.6 million. Although this statistic is only slightly more than 1%, it has almost doubled since 2001, when 0.6% of the individual returns were audited.

Of those audited, more than 80% end up paying additional taxes and/or fees in 2010. Such collections amounted to an additional $55 billion; however, this number is down $3 billion from 2010. Further, it only accounts for a small portion of the $2.3 trillion that the IRS collected in revenue last year.

Regarding corporate returns, 1% of corporations with assets under $10 million were audited and 28% of corporations with assets of $250 million and up were audited.

It is important to form your business with the most beneficial structure and revisit its structure periodically to ensure that it still accomplishes that goal. We suggest routinely meeting with your tax professional to discuss your business’s structure as well any annual return filed, whether on behalf of you individually or your business.

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