IRS cracking down on wealthy tax cheats

When the IRS offered amnesty to those hiding money in offshore accounts if they fessed up, it was just getting started.

The Internal Revenue Service has formed the Global High Wealth Industry Group, which will delve into the often fantastically complicated finances of the very rich to discover what they may be hiding. A small number of audits targeting those with tens of millions in income or assets will begin next month, The Wall Street Journal reports.

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"You cannot assess compliance among the nation's wealthiest individuals by looking only at their 1040s," IRS Commissioner Doug Shulman told the American Institute of Certified Public Accountants' national conference this week.

In other words, Texas journalist Kay Bell said, rich people have ways of hiding money that wouldn't occur to regular folks.

"Such elaborate lives, businesses and taxes are part of why, as I noted earlier, the wealthy are different from you and me," Kay wrote at Don't Mess With Taxes. "Not only are they, well, rich, but when it comes to finances, they can afford to hire the very best to provide them with whatever type of tax planning and filing they require."

Shulman explained how the IRS is looking at the bigger picture:

And let me give you a flavor of these complex financial arrangements. They may include 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 that require looking at the entire, and often huge, spectrum of transactions and entities.

Meanwhile, Congress wants to help out. A new bill introduced today would make it more difficult for rich people to hide money overseas. Daniel Indiviglio explains in detail how it would work in a post at The Atlantic.

Related reading:

• The biggest tax cheats: Rich folks
• Tough time to be a tax cheat
• Rat out your neighbors, get paid by the IRS
• The world’s richest tax cheats