People who make $1 million or more a year are closely watched by the Internal Revenue Service (IRS) and have higher odds of being audited by the agency.
Nearly 10 percent of individuals making $1 million or more during 2015 faced an audit by the IRS, according to a new report from the agency on 2015 collections. That number is up 7.5 percent from the previous year and is roughly double 2006 levels, reports The Wall Street Journal.
Over the past 10 years, upper-income earners are increasingly targeted by the IRS, which audited just 5.3 percent of 2006 returns from earners making $1 million or more. The agency is increasingly using electronic methods to audit rather than utilizing field audits, which are conducted in person by a representative of the agency. Electronic audits rose 35 percent in 2015, while field audits dropped 8 percent over the last year.
“Ten years ago fewer of my clients were examined, but the audits were more comprehensive,” David Lifson, a certified public accountant with Crowe Horwath in New York who deals with many wealthy clients, told The Wall Street Journal. “Now, they can expect to hear from tax agencies more often, but on fewer issues.”
The IRS created a group specifically intended to target the wealthy in 2009 named the Global High Wealth Industry Group. The group, made up of industry experts in accounting, trust and estate law, has become more aggressive in recent years. The collection agency told the Global High Wealth Industry Group to increasingly focus on wealthy tax filers, as well as lawyers, according to CNBC.
Overall, the IRS conducted fewer audits and collected less revenue in 2015 than the previous year — total audits in 2015 hit their lowest level in a decade. Of the 147 million Americans who filed individual tax returns, less than 1 percent were audited by the collection agency. Total revenue for the year fell from $57 billion in 2014 to $54.2 billion in 2015.
The agency has also experienced a decline in IRS agents. The agency has lost roughly 25 percent of agents and enforcement officers, despite handling an increasing case load.
“Currently, we remain more than $900 million below our 2010 funding levels despite handling 10 million additional returns,” IRS Commissioner John Koskinen said in a statement.
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