Millionaires in Texas and throughout the United States should be on alert for the IRS to come calling. The federal tax agency is reaching auditing these wealthy individuals more than ever.
Data recently released by the IRS showed that millionaires last year were audited almost twice as much as they were in 2010. In all, the IRS audited 1.1 percent of taxpayers in 2011, about the same rate as the year before. For taxpayers who earned between $1 million and $5 million, the number rose from 7 percent to 12 percent.
For those making between $5 million and $10 million, the number of audits reached 21 percent, an increase from 12 percent in 2010. And for those who claimed income of $10 million or more, 30 percent of them faced audits, as opposed to 18 percent in 2010.
Even for people who haven’t earned $1 million in a year, the risk was slightly higher last year for an audit. For people who made between $500,000 and $1 million, the audit rate rose to 5 percent from 3 percent in 2010.
Experts said various factors have contributed to the increase in audits. The government has pushed for finding offshore tax evaders, who tend to have higher incomes, but some suspect the cause could be political, as well.
An assistant academic specialist of accounting at Northeastern University said that in the wake of revelations about the low taxes paid by presidential candidate Mitt Romney, a millionaire, the IRS wants to prove to the American public that it is monitoring the millionaires.
Additionally, the IRS wants to bring in more money, and the agency has a better chance of recouping money from millionaires through audits, the accounting specialist said. Filings of higher earners are more complex and that increases the possibility that an error could occur, meaning the IRS could find areas of underpayment.
Source: CNN Money, “Audit rates of millionaires nearly double,” Blake Ellis, March 23, 2012