From time to time, the Internal Revenue Service (IRS) announces a campaign to target a particular sector of society and audit their tax returns. If you earn a high income, there may be a letter dropping through your letterbox this month. These are the two main reasons given by the head of the IRS’s Large Business and International Division (LB&I) as to why they may target you or your business:
- If you have a connection with a private foundation. The IRS will focus on whether private foundations have been guilty of illegal acts of self-dealing, such as lending money or transferring assets to a disqualified person.
- If you have a connection with a pass-through entity such as an S-Corporation or partnership. The IRS will be examining transactions or restructuring done by businesses related to Section 199A of the Tax Cuts and Jobs Act of 2017 (TCJA).
There is one more group they will focus on: high-income earners who have not filed tax returns in the last few years. In a report by the Treasury Inspector General for Tax Administration (TIGTA), the IRS was criticized for failing to pursue these 879,000 nonfilers. It estimates they owe $46 billion in outstanding payments over the last three years
Tax laws can be challenging to understand. If your accountant has not kept up to date with changes, you could find yourself facing serious charges. Seek professional help from an attorney who specializes in tax matters if the IRS has begun a tax audit on you or your company or if you have not filed your tax returns in the last few years.