bills-personal-finance-audit-tax

Your richest cross-border clients could face increased IRS scrutiny.

The tax department is rethinking which taxpayers to spend the most time auditing.

Read: Advising clients with short careers

The Treasury Inspector found that while the IRS spends 50% of its time auditing people with incomes of US$200,000 to US$399,999, it would be more productive to focus on people making US$5 million and up.

For every hour the IRS spends auditing people with US$200,000 to US$399,999 in income, it discovers US$605 in taxes owed. In the US$5-million plus bracket, that amount is US$4,545.

Read: 13 accounting red flags

Forty percent of federal income taxes collected are paid by 1% of U.S. taxpayers, notes the IRS report.

Years of budget cuts have forced the IRS to scale back its audit operations. In 2010, 1.11% of all returns were audited, and in 2014, 0.86% of all returns were audited.

Read: Meet the next wave of Canadian billionaires

Adjusted Gross Income Audit Coverage (2014)
No Adjusted Gross Income 5.26%
$1 to $24,999 0.93%
$25,00 to $49,999 0.54%
$50,000 to $74,999 0.53%
$75,000 to $99,999 0.52%
$100,000 to $199,999 0.65%
$200,000 to $499,999 1.75%
$500,000 to $999,999 3.62%
$1 million to $4,999,999 6.21%
$5 million to $9,999,999 10.53%
$10 million or more 16.22%
All returns 0.86%

Originally published on Advisor.ca

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