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High earners more likely to be audited

A new analysis of Internal Revenue Service data shows that the IRS is more likely to go after high-wage earners than lower income taxpayers. The data revealed that taxpayers who have taxable incomes in excess of $1 million were almost 12 times more likely to have a tax audit conducted on them, compared to other taxpayers.

Out of the high-wage earners who were audited, approximately one-eighth of them were examined by the IRS in 2012 fiscal year, resulting in 41,000 examinations. While approximately 25 percent of these tax returns did not result in any change in the taxes that needed to be paid, the vast majority of the returns resulted in a change. Some audits resulted in finding that more taxes were owed. On average, the amount of additional taxes per return was $117,000, totaling about $4.8 billion overall.

The IRS has established a new campaign to target higher wage earners. Special investigators from the Global High Wealth Industry Group may audit these individuals and check for oversea accounts, misappropriate use of tax shelters and deductions that they should not be claiming. This group was established in 2009 with a group of professional tax representatives who have received training pertaining to complicated tax returns that wealthy individuals file, including returns from businesses and specifically sole proprietorships that may contain more complicated scenarios than the average personal tax return.

Individuals who earn substantial incomes may be subjected to IRS targeting by the simple fact that they make more money and may have more taxes owed to the government. They may consult with a Boston tax attorney to ensure that they have taken all of the possible precautions to minimize their tax obligation.

Source: CNBC.com, "IRS Top-Earner Audit Team Picks Off One in Eight," Robert Frank, April 4, 2013

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