Your richest cross-border clients could face increased IRS scrutiny.
The tax department is rethinking which taxpayers to spend the most time auditing.
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The Treasury Inspector found that while the IRS spends 50% of its time auditing people with incomes of US$200,000 to US$399,999, it would be more productive to focus on people making US$5 million and up.
For every hour the IRS spends auditing people with US$200,000 to US$399,999 in income, it discovers US$605 in taxes owed. In the US$5-million plus bracket, that amount is US$4,545.
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Forty percent of federal income taxes collected are paid by 1% of U.S. taxpayers, notes the IRS report.
Years of budget cuts have forced the IRS to scale back its audit operations. In 2010, 1.11% of all returns were audited, and in 2014, 0.86% of all returns were audited.
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Adjusted Gross Income | Audit Coverage (2014) |
No Adjusted Gross Income | 5.26% |
$1 to $24,999 | 0.93% |
$25,00 to $49,999 | 0.54% |
$50,000 to $74,999 | 0.53% |
$75,000 to $99,999 | 0.52% |
$100,000 to $199,999 | 0.65% |
$200,000 to $499,999 | 1.75% |
$500,000 to $999,999 | 3.62% |
$1 million to $4,999,999 | 6.21% |
$5 million to $9,999,999 | 10.53% |
$10 million or more | 16.22% |
All returns | 0.86% |