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IRS ‘rich auditors’ under fire

By Kay Bell ·
Thursday, May 19, 2011
Posted: 1 pm ET

Is the Internal Revenue Service spending too much of its time and our tax money tracking down wealthy tax cheats?

That's the charge from one watchdog group.

Transactional Records Access Clearinghouse, or TRAC, a data gathering, research and distribution organization at Syracuse University, contends that the IRS's Global High Wealth Industry group is not doing its job.

The special audit group was created in 2009 to, according to the IRS, "centralize and focus the IRS compliance expertise" on "high wealth individuals and their related entities."

But TRAC says its examination of records it obtained via the Freedom of Information Act show that the IRS office targeting the suspected rich tax evaders has only managed to audit a handful of tax returns in its first 18 months. Specifically, two returns in fiscal year 2010 and 11 during the first six months of fiscal 2011.

By comparison, says TRAC, all of the groups located in the IRS's Large Business and International Division audited 42,835 returns in fiscal 2010 and by the end of March had audited 29,688 returns during this current fiscal year.

To give the IRS the benefit of the doubt, the Global High Wealth Industry group is relatively new. It takes a while for any new office to get up to speed.

Plus, rich folks have lots of smart tax advisers who employ sophisticated tax techniques to help their clients pay as little as possible. Untangling suspected tax fraud in these convoluted cases takes time.

Still, if the IRS audit group was getting a report card it would at best be an incomplete and probably a D-minus if you're an easy grader. TRAC and other critics of the group's performance say it should get an F.

I'm willing to give the audit-the-wealthy crew through the end of the 2011 fiscal year.

We also have to keep in mind that there are two categories of figures to consider when it comes to taxes: actual number of returns audited and the dollars that the examinations produced.

TRAC didn't address the dollar figures in its report. Personally, I'm curious as to how much extra tax revenue these limited audits brought to the U.S. Treasury.

Sure, 13 audits aren't many, but if those 13 audits each discovered six-figure tax cheating, well …

To clear things up, the IRS should give all of us a bit more info about this special tax examination group and how it's doing. Remember, TRAC had to file formal paperwork to get the bit of data that it used for its analysis.

Then we all can better determine whether, in this time of big budget deficits, a program that targets wealthy taxpayers for audit deserves to be cut some slack for a bit longer.

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June 18, 2011 at 8:48 am

@Juan: Even a 100% tax rate on the rich would NOT solve many of the nation's problems. Your idea would only move the rich and/or their money outside the country. Or perhaps you think that one of our problems is not having enough vacant mansions for sale.