As I sat down to write this article, I re-read my December 2009 article “Get Ready for a One-Two Punch: More Taxes and More IRS Audits“. I realized that with the exception of adding a few more contemporary examples, the article had already been written. The point of that article – – that the IRS and State tax authorities are both increasing the scrutiny of tax filings and aggressively pursuing taxpayers for deficiencies and penalties – – is just as apparent, if not even stronger, in 2012.
The IRS recently reported that one in eight taxpayers showing more than $1 million in income were audited during 2011. This is the third consecutive year showing an increase in audit rates at this income level (which, I humbly submit, makes my 2009 article rather prescient). The IRS also stated that much of the increase in audits is attributable to its crack down on foreign accounts.
The increase in audits has been picked up in the press. For example,
- More IRS Audits Coming Your Way (Forbes, January 12, 2012);
- IRS Audits of High Earners Increase Sharply (Wall Street Journal, January 5, 2012)
(noting that the IRS increased field audit rates by 34% between 2010 and 2011 for taxpayers with income exceeding $200,000);
- U.S. IRS Audited Record Millionaires in Fiscal ’11 (Bloomberg, January 5, 2012)
What should you do? We repeat the advice we offered previously.
First, work with competent, experienced tax counsel, who utilize proven, tax-compliant strategies.
Second, have tax counsel conduct a “friendly audit” – review your financial activities, bookkeeping and record keeping procedures, and accounting practices to uncover and correct sensitive areas before they are discovered in an IRS audit. Become essentially “audit proof”.
If you are being audited or investigated by the IRS or a state tax authority, hire legal counsel with a proven track record of success against the government. Rubinstein & Rubinstein, LLP has been advocating on behalf of taxpayers for close to twenty years. Our attorneys have extensive experience in the representation of clients before the IRS and before state tax departments. Such representation has included:
“the review and analysis of tax returns and underlying documentation;
- representation at audits;
- representation in Voluntary Disclosure initiatives;
- negotiation of Offers In Compromise, abatements of penalties and/or interest and installment payment plans;
- protest and/or appeal of determinations of tax deficiency and tax assessments; and removal of tax liens;
- representation of clients in civil and criminal tax investigations;
- litigation on behalf of clients before the U.S. Tax Court.
As the Government – – at the federal, state and local levels – – attempts to raise revenue, it calls upon more tax collection and enforcement, and aggressive IRS and state action in pursuit of maximum taxpayer dollars. Against this context, you need tax lawyers who can help you legally and effectively lower your tax bill. And if you are challenged by the IRS or by a state tax authority, you need effective legal counsel to fight back on your behalf.