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Could You Be Facing an IRS Audit Soon?

On Behalf of | Jun 17, 2021 | Taxes

The head of the Internal Revenue Service (IRS) announced in mid-April that the federal agency planned to crack down on tax compliance of wealthy individuals and corporations. When asked for his plans to do so, he noted that the top 1% of these two entities fail to pay enough in taxes.

He pleaded with lawmakers to increase their funding of the tax collection agency so that it could begin performing audits. Are you or your company at risk for tax problems?

How much in taxes reportedly goes unpaid?

At his April 13 meeting with senators, IRS Commissioner Charles Rettig noted that an estimated $1 trillion has gone unpaid to the IRS. He then broke down the amounts as follows:

  • Taxpayers didn’t pay $441 billion in taxes annually between 2011 and 2013.
  • Tax collectors recovered $60 billion of the outstanding taxes.

An estimated $381 billion in uncollected annual taxes remains.

What do wealthy individuals and corporations allegedly fail to pay taxes on?

The commissioner highlighted how wealthy individuals and corporate entities are least apt to report cryptocurrencies and foreign and illegal source incomes. Thus, they don’t report transactions or pay any taxes associated with them. He also said that pass-through tax filing and offshore accounts are often used to avoid detection.

Commissioner Rettig said that 36% of the top 1% of corporations or wealthy individuals pay too little taxes. He noted that this equates to an estimated $175 billion loss.

Why the IRS’s enhanced enforcement should mean to you

It’s not yet clear when the IRS plans to roll out its increased audits and enforcement plans. You may want to review your tax situation sooner than later so that you don’t find yourself looking over your shoulder for a letter from the IRS letting you know about an impending audit.

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