Offshore tax shelter? Check. Income hidden from tax authorities? Check. New IRS unit specifically set up to target taxpayers with tens of millions of dollars? Check.
IRS Commissioner Doug Shulman told the American Institute of Certified Public Accountants Monday that the agency has set up a unit specifically to deal with rich Americans who are hiding assets.
“We will take a unified look at the entire web of business entities controlled by a high-wealth individual,” Shulman said. “At least initially, we will be looking at individuals with tens of millions of dollars of assets or income.”
“The high-wealth unit will focus on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals. While use of sophisticated legal structures are at times legal, there are other instances where they ‘mask aggressive tax strategies,’ he said.”
“You cannot assess compliance among the nation’s wealthiest individuals by looking only at their 1040s [tax returns],” Shulman added. “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.”
The Wall Street Journal says “wealth advisers” are upset.
Wealth advisers questioned how much the new IRS approach adds, since in some cases, even under the old structure, an audit of a high-net-worth person may have looked across multiple income sources and asset classes.
However, “audits can sometimes be quite insular and silo-like,” said Ronald Aucutt, a partner at the law firm of McGuire Woods. In particular, gift-tax audits and income-tax audits are usually not coordinated, he said.
The reorganization is part of a multifront IRS effort to crack down on tax evasion by wealthy Americans. The agency is now sifting through the results of a partial amnesty program that netted 7,500 disclosures by Americans who held offshore accounts.
Japan, Germany and the UK already have such units, Reuters said.