High-net-worth and high-income taxpayers soon might find themselves the target of an IRS examination, if they haven’t already. In response to criticism that high-income individuals are not being audited at the same rate as low-income individuals, the IRS has published statistics supporting a renewed focus on auditing high-income individuals and announced a new initiative aimed at auditing hundreds of high-net-worth taxpayers.
The new high-income initiative is a joint effort between the Small Business/Self-Employed Division (SB/SE) and the Large Business and International Division (LB&I). There is some overlap of this initiative with the existing global high-wealth program within LB&I, which began in 2009.
Unlike the global high-wealth program, which is focused on the entire enterprise associated with a wealthy individual, the high-income audits are focused more on individual taxpayers, though they will include at least one related entity such as a partnership or an S corporation. Criteria for inclusion in each program also is different. Inclusion in the global high-wealth program is based on either income or assets, while inclusion in the high-income program is based on only income items.