Tuesday, October 27, 2009

NEXT IN THE IRS' SIGHTS - HIGH NET WORTH INDIVIDUALS

Basking in the glow of the recently completed offshore voluntary compliance program, IRS Commissioner Shulman in a recent speech revealed a new direction for IRS enforcement - high net worth individuals. The Commissioner noted the recent formation of a Global High Wealth Industry group housed in its Large and Mid-Size Business operating division. The IRS is concerned that the complicated legal structures of high net worth individuals often mask aggressive tax strategies.

Areas of possible abuse cover a large gamut of legal and tax structures, including trusts, real estate investments, royalty and licensing agreements, revenue-based or equity-sharing arrangements, private foundations, privately-held companies, and partnerships and other flow-through entities. For these purposes, the IRS may use taxpayers with a net worth in excess of $30 million as the target demographic of its scrutiny.

The Commissioner also indicated that the IRS will be continuing its international enforcement efforts. These efforts include increased scrutiny of annual FBARs or foreign bank and financial account reports, and updating definitions and instructions under the current FBAR rules. The IRS is also opening international Criminal Investigation offices in several new locations around the world - in Beijing, Panama City and Sydney, in addition to existing offices, such as Hong Kong and Barbados.

Remarks before the AICPA National Conference on Federal Taxation, October 26, 2009
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