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Tuesday, October 27, 2009

WSJ: IRS Brings New Focus to Auditing the Rich

Wall Street Journal, IRS Brings New Focus to Auditing the Rich, by Martin Vaughan:

A new IRS enforcement unit targeting the very wealthy will help the tax agency decode partnerships, offshore trusts and other complex techniques used to hide income, IRS Commissioner Doug Shulman said Monday.

Dubbed the Global High Wealth Industry group, the unit will launch "a small number" of audits of individuals with assets or income in the tens of millions of dollars, Mr. Shulman told an accountants' trade group. An IRS official said the group would begin work on these initial audits in the next month.

The high-wealth group, housed in the IRS's large- and medium-sized business division, marks a sharpening of the IRS approach to auditing the very wealthy. Its creation is a response to the complex web of entities and transactions many high-net-worth individuals use to manage their financial affairs.

"You cannot assess compliance among the nation's wealthiest individuals by looking only at their 1040s [tax returns]," Mr. Shulman said. "Our goal is to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise."

(Hat Tip: Ann Murphy.)

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