IRS Drastically Increases Its Audits Of America's Richest Taxpayers

In 2009, the Internal Revenue Service announced plans to unleash a new enforcement unit called the Global High Wealth Industry, the goal being to better investigate the complex finances of America's wealthiest taxpayers.

They weren't kidding.

Recently released IRS statistics indicate that the federal government increased their audits of America's richest taxpayers -- those with incomes above $10 million -- by 75 percent last year. Nearly one in five -- 18.5 percent -- of America's richest households dealt with an audit. In 2009, the Global High Wealth Industry's first year of operation, the IRS audited only one in ten of America's richest taxpayers.

Complex tax evasion has become an increasing problem in recent years, with popular strategies including conversion of income into capital gains and stashing cash in Swiss banks.

Audit rates also increased among some lower income brackets, but none so much. The second highest audit increase was among the second highest income bracket: those reporting incomes of $5M-$10M. They saw a 55 percent increase in their audit rate, totaling 11.6 percent. High, but much smaller than the increase experienced by the $10M-plus bracket.

Audits rate for those with incomes between $1-$75K remained largely the same.

Overall, the IRS increased the percentage of audits by about 11 percent from the year prior. That means 1.58 million tax returns -- about 1.11 percent of all returns filed -- were audited, costing the IRS about 53 cents per $100 collected -- a 3 cent increase from 2009.

Criminal investigations by the IRS also increased by 14.2 percent this year, according to Businessweek. Demographic breakdowns of the alleged criminals are unavailable.

Comments

[AuntInAZ]

04:16 AM on 03/31/2011

I don't give a hoot how much money the wealthy have, or how much they make. Many of them work very hard for everything they have and aren't sitting around eating bonbons or something.

However, having said that, I think it's only fair they pay their share. Some do, they're not all tax dodgers, and many are wonderful philanthropists. I just want everyone to pay their fair share, and giving tax breaks to a very high income group while cutting benefits and expecting the poor and working class to pay more is wrong. Yet it goes on and on and on and is happening more and more and more.

Therefore I say IRS audit away!

[moonglowsun]

10:25 PM on 03/30/2011

In theory this might be considered a grand gesture, but in reality what good will this do? The administration gave those fox the key to the hen house when the Bush Tax cuts were renewed. These pitiful excuses for human beings are the poster children for greed and selfishness. While the majority of struggling Americans bleed, they sing and dance with the money they hid and the taxes they never paid.

[Jeff1958]

04:44 PM on 03/29/2011

landonswan (3/29 at 4:15 PM) wrote, "No I am not a billionair­e but I hope to be one day. I don't think the question should be "why am I defending someone", rather, "why are you attacking someone?"

Why do so many on the left despise the rich? Why not be happy for them, for all they've accomplish­ed? Why not use them as a benchmark for success, as a goal and as inspiratio­n for what can be achieved? Why focus on how much they have and how you can take it for yourself? Why not focus on your life, and how if you work smart and hard, you too can have success?"

Here's an example of someone who just doesn't get it at all. People on the Left aren't attacking people on the Right. Stop projecting. Those on the Left are saying that the system is inherently unfair. Even rich people on the Left say this. I have enough for myself and my family. Sure I'd like to have more. But it isn't about ME. It's about WE. And that's something those on the Right will never understand.

[Jeff1958]

03:34 PM on 03/29/2011

oilfield (3/29 at 1:59 PM) wrote, "i pay taxes to support society...­.there should be a limit to our contributi­ons to our brothers trust/food fund. everyone pays fica as they should....­there is a cap because it is a minimum insurance policy....­not a retirement account...­.you arent getting that....wh­y dont some union employees have to participat­e in social security..­.dont they have a society to contribute to? those driving pay fuel taxes.....­that pays for the roads (recent exemption would be anyone with an all electric car) i have never voted for a tax increase..­..and probably never will....th­ey do come up on the ballet though. i think we need to fund public education.­..just not on a national level....d­oe should be abolished."

I get that people like you complain about SS running out of money but don't support raising the cap. Why not? Why should the rich pay the same percentage as the rest of society?

Roads are paid for by taxes that include fuel taxes. Or should only people who drive on certain roads pay taxes for those roads (which would lead to expensive taxes in low population areas)?

Abolish the DOE? Seriously? How libertarian (and short-sighted of you). Get back to me when you home school your kids, pave your own roads, obtain your own water and transport your own sewage.

[landonswan]

04:20 PM on 03/29/2011

DOE should simply send out vouchers. Let free markets compete over the vouchers and let parents choose the best schools.

"I get that people like you complain about SS running out of money but don't support raising the cap. Why not? Why should the rich pay the same percentage as the rest of society?"

Because benefits are capped.

[Jeff1958]

04:53 PM on 03/29/2011

Do you suggest omitting religious schools from participating in any voucher program?

Should federal and state income tax also be capped?
Can benefits be adjusted (up or down)?
Can the FICA cap be adjusted up?
Can the FICA tax rate be adjusted down?

[StopMakingSense2]

02:49 PM on 03/29/2011

About time. The republicans better hurry up and cut all their funding or abolish the IRS or the government might not run out of money foiling their plans to destroy America.

[The Right is Wrong]

12:15 PM on 03/29/2011

Make sure everyone of the rich pays their fair share!!!!

[oldgrendel]

11:31 AM on 03/29/2011

Go get 'em IRS!!! Take no prisoners.

[mbondr1]

11:26 AM on 03/29/2011

Biiiiigggg govun-meeeent! Cut that IRS budget!

[Jeff1958]

01:50 PM on 03/29/2011

You want the Iiars and cheaters to get away with their misdeeds?

[StopMakingSense2]

02:56 PM on 03/29/2011

So you like cheaters? Must be a republican! Well guess where they are going to make up for that lost revenue? Then you can whine about that.

P.S. many parts of the third world have no taxes, government, rules, or regulations. Republican/Teabagger paradise! Feel free to go there since that is such a better program that ours. You won't be missed...

[Sundialsvc4]

10:40 AM on 03/29/2011

I think that Revenue needs to be spending its time making its overall process more efficient. Yes, eliminating the printing-cost of thousands of different types of paper forms was a big step forward, but the fact remains that the hideous complexity of the tax code, as unavoidably seen by ordinary Americans, is a huge loss of revenue.

When almost 50% of your gross-profit goes into overhead and operating costs, "Houston, you have a problem."

The stated objective of Revenue is to generate tax-income for the United States Government, and to do so by exactly two means:

(1) to ensure that all the tax that is due, is collected, consistent with goal #2 ...and...

(2) to do so with the least amount of overhead cost, consistent with goal #1.

Is the best way to do that to go after "the richest taxpayers?" That might be politically expedient, but it is far more likely that the root cause of the revenue problem lies more with #2 than with #1. You are, so to speak, engaging in about 311 million tax-collection transactions per year. If you can squeeze just $10 in pure-overhead costs out of every one of these, that's $3.11 billion(!) in net-profit gained.

Seriously...are those "high profile busts and audits" going to recapture $3.11 billion? I doubt it, especially after audit-costs.

IRS isn't being paid to be Rambo. Its only mission is the bottom-line.

[Sundialsvc4]

10:47 AM on 03/29/2011

Here is what I would like to see Revenue pestering the US Congress to do ...

Go through the tax-code, page by thousands-of page, and figure out how much of a revenue differential would actually occur if that page were eliminated. Also calculate how much money it actually costs to enforce the provisions on that page.

The "80/20" rule undoubtedly applies. 80% of your =net= collected revenue is probably coming from 20% of the code. The key word here is, "net."

Of course it is understood that some of the code (that which is not oriented toward political graft) is intended as an incentive. The biggest power of government taxation is to deliberately create ways to avoid it, thus to promote certain desirable behavior in corporations and individuals. All of that is understood, and must be taken into account. But even so, the page-by-page walk through of the vast existing code still has merit and still should be done.

"Volume" is still a key consideration, and I think that more scrutiny should be focused on "cost of collection" issues, than on "gross revenue gained." I suspect that the present thinking within Revenue is quite the opposite: "let's go for big-money low hanging fruits." An understandable and predictable way of thinking, but probably misguided in the bigger picture.

[si1]

11:23 AM on 03/29/2011

you are completely ridiculous - one Billionaire making $100 milllion a year - might cost $1 million to go after but could yield 100's of millions over a lifetime of detective work

if IRS had incentives like whisle blowers the lid would come off on how much money could be raised - it would close the deficit overnight!

every forensic accountant and investment banker - would work for IRS rather than wall street

[Computer Geek]

10:18 AM on 03/29/2011

'53 cents per $100 collected'

WOW! That is the best ROI I have ever seen! They should hire thousands more auditors and audit on a more regular basis.

[Jillian Barclay]

06:22 AM on 03/29/2011

It's about time! But with incomes like that, these people certainly have an army of high-priced lawyers, so it will probably net zero...

[PeterNPaul]

06:09 AM on 03/29/2011

While we concentrate on enforcing the unenforceable, we refuse to address the systemic problem-the tax code itself. The only way to fix this is to throw the baby out with the bathwater, and start anew with a simpler more equitable system. There are many proposals on the table, any of which would be better than the current system. Without a serious effort in tax code reform, this shell game will only continue to plague the country.

[fairandbalanced100]

10:48 PM on 03/28/2011

Many of the rich people are cheating on their taxes with questionable loopholes &
hiding some of their income . Some other people could be cheating too, but it is a
small amount compared to what the rich could hide. More audits on the rich is a
good investment for IRS .

[Reno Fickler]

09:04 PM on 03/28/2011

I'm wondering just how many tax-payers fit into this $10 million and up category.