A famous New York rapper once said that he had “more money, more problems.” Is this notion actually true? When it comes to your tax returns as a high-income earner, it just might be. As the 2017 fiscal year came to a close, the IRS announced that it is changing the way it examines tax returns and wealthy taxpayers are expected to be most affected. Let’s look at the reason for the change and how you can potentially avoid trouble.
Why did the IRS change examinations?
According to Investment News, the IRS budget has been cut almost 20 percent in the past decade and, subsequently, has lost a significant number of staff. The cuts are largely due to federal government’s ongoing budget sequestration. With fewer resources and continuing changes to the tax code, the IRS has pinpointed its examinations on wealthier earners because it provides a more lucrative incentive at potentially hidden money.
Will the changes affect me?
The switch is not just affecting individual earners, but businesses too. According to Investment News the following entities are more likely to be targeted including:
- Groups that give gifts
- Individuals with more than $10 million in adjusted gross income
What steps can I take to prepare?
As a taxpayer, you have the right to take legal steps to reduce your tax burden and attempt to avoid examination. This process comes with careful advice and planning from a tax law professional.
Broadly speaking, your business can prepare for the possibility of audit or examination by:
- Examining public messages like online job descriptions and shareholder reports
- Anticipating what elements could be the target for examination
- Meticulous tax planning and record-keeping of charitable donations and other deductions
What if I’m the target of an audit?
Despite your best efforts, you still could be the target of an audit or examination. If this happens, Goldburd McCone LLP always recommends responding with the help of an attorney. Further, we invite you to take proactive steps in 2018 by reading our blog and contacting us for tax planning and advice for your business.