IRS Audits Of Millionaires Jump By Roughly A Third In Fiscal 2011

What do the Occupy movement and IRS have in common? They're both taking an interest in the one percent.

Tax audits for millionaires jumped in fiscal 2011 by roughly a third, with the Internal Revenue Service examining income tax returns for 12.48 percent of people who earn $1 million or more, according to Bloomberg. In other words, about one in every eight millionaires got an audit this year. By comparison, in fiscal 2010 the IRS only audited 8.36 percent of millionaires.

A comparison of the audit rates for millionaires and less wealthy taxpayers suggests the IRS is giving special care to the upper tax brackets. While the IRS audited one in eight millionaires in 2011, the same thing happened to just one in 100 people earning less than $200,000, according to the Associated Press.

By paying closer attention to the finances of the well-off, the IRS is putting itself in good company. Critics ranging from billionaire investor Warren Buffett to protesters in the coast-to-coast Occupy movement have said in recent months that U.S. tax law unfairly favors the rich.

At a time when millions of Americans are struggling to make ends meet -- and when the federal government faces revenue shortfalls that could bring about a wave of layoffs next year -- the country's high earners have drawn increasing scorn for paying what critics call comparatively low tax rates.

And such complaints have data backing them up. In 2009, more than 1,400 millionaires paid no federal income taxes at all, according to an August Tax Policy Center report cited by the Los Angeles Times. By 2010, that number had risen to about 4,000, and by 2011 it was up to about 7,000. Then there are the tens of thousands of millionaires who pay taxes at a rate lower than many middle-class households.

Whether increased audits will translate into more criminal investigations is not yet known. But in 2010, the IRS ramped up probes by 14 percent, according to Businessweek.

 

 

Comments

[mjeffn]

01:07 PM on 01/11/2012

Good on the IRS. They need to focus their increasingly limited resources where they will obviously get the greatest return on the dollars they spend enforcing the law. That is a target rich environment for them.

[Charles Queen]

10:48 AM on 01/09/2012

When it comes to the IRS I do not trust them at all.I'v never had any problems with them myself.I know people that did but not much came of it.I knew one guy that hadn't done his taxes for 5 years and they still allowed him to file and even things out.They told him they had a like 5 year grace period.Of course he wasn't a millionare either.I would say it would more like company's that owe them or owners of them

[sonnybrakes]

05:27 AM on 01/09/2012

A sure fire way to avoid paying taxes is to avoid working. Have a robot do your work, it doesn't ever have to file a return. Problem solved. Next issue.

[sonnybrakes]

05:18 AM on 01/09/2012

That's right, think twice and then evade them, the IRS that is. Taxes, where money goes to die.

[Labor Party]

02:01 PM on 01/08/2012

This Budget proposes to close dozens of unfair loopholes that cost hundreds of billions of dollars, including measures to raise:

* $36 billion by rolling back tax breaks for oil companies, including special credits that subsidize oil exploration and drilling;
* $86.5 billion by closing the "check-the-box" loophole, which gives companies that invest overseas the ability to make their foreign subsidiaries "disappear" for tax purposes – enabling them to shift profits to tax havens and giving them a leg-up on firms that invest in the United States;
* More than $103 billion by ending tax preferences for international investments, including the rule that allows firms to take an immediate deduction for their overseas investment expenses while delaying paying taxes on overseas income and the rules that allow firms to claim excessive tax credits for their overseas investments; and
* $58 billion to support the Health Reform Reserve Fund by closing domestic tax loopholes and increasing domestic compliance. This includes targeting valuation games played by those facing estate and gift taxes that allow them to undervalue transferred property, denying a tax deduction for bad-actor firms hit with punitive damage claims and repealing preferential tax treatment for commodities dealers and day traders.

On income the poor and middle class are paying more than the 15-18% the wealthy are on capital gains, dividends, and estate taxes.

The full text of the Greenbook is available at http://www.treas.gov/offices/tax-policy/library/grnbk09.pdf

[nappyman]

09:01 AM on 01/08/2012

Every decade you need a Leona Helmsley example to scare the bejeezes out of them.

[mjeffn]

01:09 PM on 01/11/2012

Recently in NY I walked by the Helmsley building. Can't it be renamed or something?

[momoluvsu]

04:49 PM on 01/07/2012

Once again, THANK YOU OWS!!

[MilesToGo]

08:16 AM on 01/07/2012

The wealthy are never worried about the IRS. Tax evasion schemes are why they hire & retain tax attorneys. The worst penalties they'll ever face involve small fractional fines relative to the much larger revenue not paid or avoided that may have been due.

[wsdave]

03:56 PM on 01/07/2012

Actually, they hire tax attorneys for tax AVOIDANCE, not tax EVASION. You don't need an attorney to break the law, you need one to navigate it.

[MilesToGo]

06:28 PM on 01/07/2012

We might wish that mere tax avoidance was what is actually in play. The ambiguities of the tax code though in fact ensure evasion schemes...and you know this, even if you claim denial.

[MilesToGo]

09:09 PM on 01/07/2012

Evasion & Avoidance are merely opposite sides of the same coin. Mere semantics.

[Southwestern Patriot]

08:01 AM on 01/07/2012

That is about right for the Obama admistration. Obama hates wealthy people but he loves wealth. they need to audit him for the past seven years.

[Labor Party]

12:25 PM on 01/08/2012

Lets see Mitts returns...........

[Ainsi sera groigne qui]

12:27 AM on 01/07/2012

By the IRS's own figures the tax gap in the United States is growing (up to about 87% from 85%) and it's not happening just because those with great weath are evading taxes. Rather a bulk of this unreported income is coming from the growth in self-employed and other business income that should be paid via personal tax filings.

Sole proprietorship businesses are growing as more persons either out of choice or necessity become self-employed. Much of this growth is in service type employment which is easily paid in cash or checks to personal accounts. Unless the payer is audited by the IRS which often launches lateral audits to see where the money has gone or went it is very hard for the federal and or local governments to track this underground economy.

In our area we have dog walkers, personal trainers, house cleaners,landscapers and so forth that manage to lead very comfortable "middle class" lifestyles all without visible means of support, well at least in terms of tax filings. It's easier to bash the wealthy whose incomes be they earned or reported dividends, rents, etc... are easily traced.

[sillygames]

10:29 AM on 01/07/2012

@ Ainsi sera graigne qui,

I bet you a dollar to donut the "dog walkers" "personal trainers" "house cleaners" ALL had REAL
JOBS, but were lost to the econonic turndown. I find your remarks totally "UNAMERICAN" why
are you such a cheerleader for the wealthy.

[Ainsi sera groigne qui]

11:56 AM on 01/07/2012

No, think not, at least no the ones we know of. Most have been at their "careers" for quite sometime now. Dog walking/pet sitting here in our area of NYC at least is populated heavily by Brazilian men.

Have no doubt that there are persons whom turned to this or that in order to keep their butter stuck to their bread but that still is neither here nor there.

As for "cheerleading for the wealthy" there you and your lot go again. It's always go after the "rich" but please look the other way when it comes to *me*. Well unless that looking extends to illegal immigrants whom deserve the same scrutiny tax wise as the wealthy.

One has only to look at the sad government fiscal situation playing out in several EU countries where there is a large tax gap/under ground economy. Funding for government nust come from somewhere, and where persons do not pay others must pay more.

[lofttypeofaview]

09:44 AM on 01/09/2012

I believe that everyone should pay their taxes. However I also believe that people who make under $1,000 a month should be exempt from paying taxes, since they aren't even making enough to survive; let alone have anything left to pay taxes.

[akindependent]

03:39 PM on 01/08/2012

They shared your tax returns with you?

[CPAwADD]

11:52 PM on 01/06/2012

I can think of three reasons.
1. Interest
2. Penalties
3. Criminal Prosecution

[cadawa]

04:10 PM on 01/06/2012

While its true that 300 billion in back taxes are owed the US government, mostly by high worth individuals (anyone home at the IRS?) million and billionaires don't have to evade taxes to hang on to most of what they steal. The system is set up in their favor. By taking most of the 'earnings' in capital gains, their tax rate tumbles to lower than their secretary's. It's very likely the reason why Romney doesn't want you to see his tax return. http://www.counterpunch.org/2012/01/05/have-the-super-rich-seceded-from-the-united-states/

[moreman]

01:40 PM on 01/06/2012

Going from 8.36% to 12.48% is approx a 50% increase, not 1/3. Where do you people learn your math?

[Patriot86]

01:17 PM on 01/06/2012

About time...and could we please jail the off shoring crowd?

[momoluvsu]

04:49 PM on 01/07/2012

I like that idea.

[Labor Party]

12:26 PM on 01/08/2012

Patriots they are NOT!

[nyjjc]

01:04 PM on 01/06/2012

Look - the government is doing what the conservatives cry that it should do - follow a private sector strategy.

Would the private sector NOT expend the most effort in the area where they would tend to bring in the greatest revenues?

Secondly, a person doing their taxes correctly and not cheating on them has nothing to fear in an audit, do they? Why should millionaires worry? Perhaps it's because they have the highest rate of cheating on their taxes?

You should all be celebrating what the IRS is doing, not lamenting it Liptonheads. Complaining about it just goes to show you support tax cheats - CRIMINALS - even when we have the lowest tax rates in generations.

[afinch9]

01:18 PM on 01/06/2012

the real question which HP ignored is the results, are the millionaires illegally evading taxes or are they paying as required?

[nyjjc]

05:47 PM on 01/06/2012

The answer is one of common sense:

If you're only income is reported to the Feds on a W2 or a 1099, it's a bit hard to lie about it and not get caught since the IRS already knows your income.

So, since we know most poor and most middle income people only have wage income, interest income, and mainly run of the mill investment income, that are all items that have W2 or 1099 information reporting required, common sense points out where most tax fraud takes place - from the types of income where there is no automatic reporting requirement (mainly the domain of the wealth) or with the self-employed folks who can "cook the books".