The earnings gap in the U.S. and around the world continues to increase. Throughout the pandemic, the wealthy fared better than those buffeted by job loss and dramatic economic swings. Even before the pandemic and throughout, the IRS has spoken about an enforcement focus on high asset taxpayers. Prosecutorial efforts aim at opaque offshore tax shelters, money laundering, and foreign bank accounts unaccompanied by an FBAR and FATCA submission. Overall—a fair bit of media discusses the drive of the IRS to uncover high asset tax crime.
Despite the talk, a report published by the Transactional Records Access Clearing House (TRAC) of Syracuse University says otherwise. A report looking at data for 2021 offers a different picture of the present priorities of the IRS. TRAC found that low-income earners (defined as gross annual receipts of less than $25,000) were audited at five times the frequency of other taxpayers in 2021. Other interesting findings of the review included:
The TRAC report quotes The IRS Taxpayer Advocate 2021 Annual Report to Congress noting, “The IRS correspondence audit process is structured to expend the least amount of resources to conduct the largest number of examinations – resulting in the lowest level of customer service to taxpayers having the greatest need for assistance.”
The IRS gives taxpayers virtually incapable of high-ticket tax fraud the benefit of IRS expertise, prosecutorial energy, and limited budget—in order to enforce and encourage tax compliance of a demographic on which there is virtually no return for the U.S. Treasury. The latest TRAC study reporting on the first several months of 2022 indicates the IRS continues to target the lowest paid Americans—and at a higher rate than this time in 2021. In 2022, the IRS has now increased its field audits—making use of specialized, trained investigators—to pursue households barely getting by.
Apparently ruffled by the unfavorable coverage of the IRS, Director Charles Rettig retorted “That report from Syracuse University is absolutely 100% false.” When asked in a letter for the basis of his remarks by TRAC, not surprisingly, Director Rettig did not respond.
No response? Perhaps no defense. But if you receive an audit letter from the IRS, speak with an experienced IRS defense attorney before you offer the pleasure of your reply.
From offices in Chicago and Cleveland, the tax attorneys at Robert J. Fedor, Esq., LLC help individuals and entities nationwide respond to criminal tax charges, tax litigation and other tax controversy. When you need responsive, legal advice locally or abroad, contact us or call 800-579-0997.