High Net-Worth Taxpayers Targeted by IRS Wealth Squad

High Net-Worth Taxpayers Targeted by IRS Wealth Squad

IRS Wealth Squad

Wealth Squad Target High-Net Worth Taxpayers: The IRS has sets its sights on the wealthy. While high net-worth taxpayers are always at risk for increased audit, it looks like the IRS has taken a page from the Tom Clancy handbook and re-ignited the “wealth squad.” While the introduction of wealth squad dates back a few years, in 2020, the IRS made it known that it would be actively going after high net-worth taxpayers for audit and examination.

IRS Wealth Squad & IRM 4.52.1

The IRM is the Internal Revenue Manual.

We will summarize the basics of how the Global Wealth Program Processes and Procedures operate in accordance with IRM 4.52.1.

Wealth Squad Pursues High Net-Worth Taxpayers

The IRS knows there are high net-worth taxpayers across the globe who are not tax compliant, and may be engaging in some highly suspect tax planning or avoidance.

As provided by the IRS:

“Program Scope and Objectives Purpose:  This IRM section provides an overview of the Global High Wealth (GHW) program and procedures used by GHW.

Audience: These procedures apply to LB&I GHW employees who are responsible for case building and risk assessing GHW inventory and for GHW teams and other teams who are examining GHW enterprise cases.

Policy Owner: The GHW program is under the Pass-Through Entities (PTE) Practice Area in LB&I.

Program Owner: GHW is responsible for the administration, procedures, and updates related to the program.

Program Goals: To ensure GHW uses its limited resources to identify and examine high wealth taxpayers with the highest compliance risk in a consistent and efficient manner.”

IRS Wealth Squad Audit Procedures

The idea behind the Global Wealth Program framework and the wealth squad, is to take a deep-dive into the wealthy population worldwide to determine if they are in tax compliance.

The program facilitates coordination amongst various teams across the IRS framework in order to evaluate all different types if income and tax avoidance.

The IRS seeks to use information they find to determine if taxpayers are compliant on matters involving:

  • C and S corporations
  • Private Foundations
  • Gifts
  • International and offshore reporting
  • Trusts

As further provided by the IRS:

“GHW was formed to take a holistic approach in addressing the high wealth taxpayer population; to look at the complete financial picture of high wealth individuals and the enterprises they control.

A GHW enterprise case consists of a key case, generally an individual income tax return, and related income tax returns where the individual has a controlling interest and significant compliance risk is deemed to exist.

 Controlling interest can include significant ownership of or significant influence over an entity or multiple entities within the enterprise. The enterprise case may include interests in partnerships, trusts, subchapter S corporations, C corporations, private foundations, gifts, and the like.

 GHW personnel work with other personnel from other business operating divisions within the IRS to address noncompliance across the entire enterprise.

 GHW consists of two functions, Workload Services (WLS) and the field examination groups.”

Are You in U.S. Tax Compliance?

For wealthy taxpayers who are not currently in tax compliance, their risk of audit by the has  significantly increased — especially with the introduction of the wealth squad.

Depending on the type of the investment the Taxpayer has (offshore account) and level of unreported income, it may lead to significant fines and penalty.

The IRS maintains various domestic and offshore amnesty programs in place to assist Taxpayers with safely getting into compliance before it is too late.

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