IRS to begin high-wealth exams in July

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June 2020

Overview

The IRS Large Business and International (LB&I) Division announced on June 18 that it plans to begin examining hundreds of high-income individuals and related entities, typically partnerships, when the People First Initiative moratorium on investigations and collections expires July 15. The IRS Tax-Exempt and Government Entities (TE/GE) Division also announced on June 18 that it expects to see increased audits of private foundations that have linkages with or that are interwoven into global high-wealth enterprises.     

These IRS announcements follow the May 29 release of an audit report by the Treasury Inspector General for Tax Administration (TIGTA) entitled ‘High-Income Nonfilers Owing Billions of Dollars Are Not Being Worked by the Internal Revenue Service,’ calling for the IRS to develop a more effective strategy for addressing the large numbers of high-income nonfilers and ensuring their future compliance. 

TIGTA’s report prompted several Members of Congress to seek answers from the IRS on what they consider to be insufficiently low rates of audits of high-wealth individuals and related entities.

The takeaway

As many of the structures on which the IRS intends to focus for its increased enforcement efforts are complex due to ownership interests in a variety of flow-through entities, high wealth individuals who might be examined by the IRS should be prepared to address expanded inquiries into related entities.

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Kevin Brown

Principal, Tax Controversy and Regulatory Services Leader, PwC US

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