In 2017 it is expected that the IRS will focus its auditing efforts on the wealthy, in order to get the most that they can out of their limited enforcement budget.
It used to be that the IRS was actually more likely to target middle class taxpayers for an audit than wealthy people. It is more difficult to audit the wealthy because they can afford to hire expert lawyers and accountants to fight the auditors.
However, years of cuts to the IRS budget have led to a change in tactics.
The IRS now prefers to target the wealthy for audits, so the agency gets the most bang for its buck. There is simply more money that the IRS can get by auditing the wealthy than by making sure middle class Americans have filed all of their taxes correctly.
This trend is expected to continue in 2017, according to Private Wealth in “This Year’s Audits Are Bad News For The Rich.”
The IRS is expected to go after common ways the wealthy often lower their tax bills and challenge them to prove that they have done everything correctly.
For example, a charitable deduction over a certain limit might trigger the IRS to send a letter demanding proof of the donation. Reporting that money was put into a 529 education savings plan over a certain amount, could also trigger an automatic letter as could a whole lot of other common practices.
It is important that wealthy people get together with their estate planning attorneys and accountants to make sure they have done everything correctly to lower their tax bills, if they want to avoid problems with the IRS.
Reference: Private Wealth (Feb. 28, 2017) “This Year’s Audits Are Bad News For The Rich.”
