"Mister Romney, We have a revenue problem, not a spending problem."
Audit rates of millionaires nearly double - By Blake Ellis @CNNMoney March 23, 2012
The more money you have, the more the IRS wants you.
Millionaires were nearly twice as likely to receive a tax audit last year as they were the previous year, according to data released by the IRS this week.
Overall 1.1% of taxpayers were audited last year; that's about the same as in 2010. But for taxpayers with income between $1 million and $5 million, the number jumped to 12% -- up from about 7%.
The IRS audited 21% of taxpayers with income between $5 million and $10 million, up from 12% in 2010. And 30% of the nation's highest earners -- reporting income of $10 million or more -- were dealt audits. That's up from about 18% in the previous year.
The IRS said its recent offshore tax evasion initiatives have contributed to the jump in audits of millionaires, since many offshore tax evaders are high-income earners. This year, the agency is offering taxpayers a reduction in penalties and no jail time for a limited window of time if they fess up to having offshore accounts.
But part of the crackdown on millionaires is likely political as well, said
Timothy Gagnon, assistant academic specialist of Accounting at Northeastern
"There's so much controversy about Romney's low tax bracket and a lot more attention in the press about the millionaires being favored," he said. "It seems like the IRS is trying to show that it's paying more attention to millionaires and that their chance of an audit is higher than the average person."
Plus, the agency is trying to boost its own revenue, and there's typically a lot more money to recoup from auditing millionaires versus middle- or low- income earners, said Gagnon.
Tax returns also tend to become increasingly complicated as income rises, because there is more to report when your money is spread out across different items like real estate, foreign accounts and businesses -- increasing the chance of error.
Even if you haven't quite hit the $1 million income mark, you were still at a
slightly higher risk of an audit last year. The IRS audited about 5% of
taxpayers with income between $500,000 and $1 million last year -- up from 3% in
Audit rates for income levels below $500,000, however, remained relatively steady. If you reported income between $100,000 and $200,000 last year, you had about a 1% chance of an audit. If your income was between $25,000 and $100,000, your odds of getting audited were less than 1%.
But taxpayers on the other end of the spectrum -- reporting the least amount of income -- were at a higher risk of getting audited than taxpayers in the middle. If you reported income of less than $25,000 but more than $1, your chance of an audit was a little over 1%. And if you reported no income, you had about a 3% chance of being audited last year.
USA TODAY writes that the IRS audits may dip this year because of staffing shifts. "The IRS processed more than 234 million tax returns in fiscal year 2011, bringing in more than $2.4 trillion to fund the federal government. Huge? Sure. Yet the IRS' latest estimate of the net tax gap — the difference between what taxpayers owe in a year and what's not paid on time because of mistakes or fraud — totals $385 billion."
Tax cheats: Fess up without going to jail - By Blake
Ellis @CNNMoney February 9, 2011
Tax cheats hiding money offshore have until the end of August to fess up if they want Uncle Sam to take it easy on them.
The IRS announced on Tuesday that it would give taxpayers a reduction in penalties -- and no jail time -- if they fess up to any undisclosed overseas accounts by Aug. 31.
"This new effort gives those hiding money in foreign accounts a tough, fair way to resolve their tax problems once and for all," said IRS Commissioner Doug Shulman in a prepared statement. "And it gives people a chance to come in before we find them."
Tax evaders will face a penalty of up to 25% of the highest annual account balance going back to 2003, though some taxpayers will be able to receive a penalty of as little as 5% depending on the size of the account.
The program also requires tax evaders to fork over back taxes, interest and late charges for up to eight years.
IRS: Itemizers can file on Feb. 14
This is the IRS's second voluntary attempt at this program. In 2009 it reeled in 15,000 taxpayers with undisclosed overseas accounts at banks in more than 60 countries.
Penalties under the new initiative are higher than they were during the 2009 program so that people who waited to fess up aren't rewarded. However, Schulman said that as the IRS continues to invest more resources in cracking down on these illegal offshore accounts, this is the time to come forward.
"The situation will just get worse in the months ahead for those hiding assets and income offshore," he said. "This new disclosure initiative is the last, best chance for people to get back into the system."
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