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Speaker 1: Years of budget cuts at the i r S have

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Speaker 1: led to a drop in the number of audits. So

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Speaker 1: this year the agency will try to keep money flowing

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Speaker 1: into the U. S. Treasury by turning up the heat

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Speaker 1: on the ultra wealthy and large companies. The i r

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Speaker 1: S has revealed only a few details of its plan

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Speaker 1: of attack, after all, too much information could give tax

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Speaker 1: evaders clues. Joining me is tax attorney Corey Steigle of Hawkman, Salken, Reddick,

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Speaker 1: Tasher and Perez Corey. There are lots of rich people,

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Speaker 1: lots of large companies. How does the i r S

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Speaker 1: decide whom to target? Well, thank you very much. The

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Speaker 1: the i r S and the audits today, what they're

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Speaker 1: what they're auditing is things that happened in the world

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Speaker 1: world stay three years ago or within three years ago,

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Speaker 1: because that's what the statue limitations is. So what what

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Speaker 1: do we what do we have with the let's say,

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Speaker 1: the working rich that have ordinary income, let's say five

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Speaker 1: hundred thousand, a million dollars of income. They want to

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Speaker 1: offet that income potentially with our losses. So the i

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Speaker 1: r S is looking where the money is and challenging

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Speaker 1: losses that the taxpayer has, so they might be looking

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Speaker 1: at passive losses where you can offset ordinary income. Maybe

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Speaker 1: they're looking at hopy losses like say racehorse, racehorses, and

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Speaker 1: maybe there's a wall in the orchard with the ranch

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Speaker 1: that is a working ranch, there's losses coming from that,

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Speaker 1: but various things that are offsetting the income. And with

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Speaker 1: the larger businesses, they're also focusing on where they think

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Speaker 1: there could be some efficient audits. Maybe they're looking at

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Speaker 1: methods of accounting for real estate losses. Maybe they're looking

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Speaker 1: at a tax credit. But at the end of the day,

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Speaker 1: when you when you look at it, much of the

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Speaker 1: taxes are paid by the wealthy and as a result,

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Speaker 1: that's why they're focusing on the on the wealthy. Now,

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Speaker 1: will the i r S send out one of those

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Speaker 1: automated responses first, those automated questions asking you for more

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Speaker 1: information and then you get to provided or is it

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Speaker 1: a full on audit right away? Well, hopefully you do

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Speaker 1: only get a desk out it, which is perhaps something

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Speaker 1: was identified in the i r S system under their

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Speaker 1: ditch score, which we all can't know because we don't

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Speaker 1: want to, you know, they don't want us to know

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Speaker 1: everything that they're if they're looking that they're looking at,

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Speaker 1: but they'll hopefully send out a letter and follow up

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Speaker 1: on a specific thing. You give the information, you're done,

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Speaker 1: but hopefully what you don't have is one of their

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Speaker 1: Wealth Squad audits, which are really focused on the ultra

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Speaker 1: rich being stay over five five million dollars of income

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Speaker 1: a year. Let's talk about the not only the Wealth Squad,

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Speaker 1: but the Large Business and International Division, which focuses on

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Speaker 1: large companies and the ultra wealthy and includes the Wealth Squad.

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Speaker 1: And they announced thirteen new campaigns. Tell me about some

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Speaker 1: of them. Well, one of the campaigns is focused on

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Speaker 1: the high wealth earners. And basically what it is that

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Speaker 1: the at the beginning of the audit you get a

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Speaker 1: very extensive I d R that basically for for well,

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Speaker 1: the individual speaks out everything they have, looks for all

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Speaker 1: their sources of income, all their assets, if they own

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Speaker 1: an interest in and entity over they not only ask

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Speaker 1: about their activity, but the last about other board members.

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Speaker 1: So what you have is these very expanse expanse of

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Speaker 1: LB and I audits. They're almost like tentacles that reach

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Speaker 1: out not just to the save the ten forty, but

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Speaker 1: also to the businesses of the wealthy person. So now

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Speaker 1: is there a red flag that signals that they're going

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Speaker 1: to go after these companies or is it just the

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Speaker 1: size or the you know, or the wealth of the individual. Well,

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Speaker 1: LB and I focuses on on businesses that are over

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Speaker 1: ten million in assets or income UM so and and

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Speaker 1: it's it's focused on you know, very high um income

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Speaker 1: areas that are going to generate a lot of UM tax.

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Speaker 1: For instance, they have industry groups, heavy manufacturing, natural resources, retailers,

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Speaker 1: and when you look at the returns that they get

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Speaker 1: for every hour that their oddity and there they're quite significant.

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Speaker 1: So the I R S is is going to focus

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Speaker 1: and focus on these. But when you're looking at a

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Speaker 1: at a at a wealthy individual um at the end

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Speaker 1: of the day, your income alone may well be more

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Speaker 1: likely to trigger an audit because you look at a

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Speaker 1: typical person, the audit rate is say one percent, a

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Speaker 1: little under one percent. You start to make you start

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Speaker 1: to make stay two hundred thousand, which is what the

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Speaker 1: I R S starts to stay is rich. You're up

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Speaker 1: to two you're making five million, you up to eleven percent,

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Speaker 1: you're over ten million, you have a sixty percent of

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Speaker 1: an audit. That's a couple of years ago. We don't

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Speaker 1: have the most recent data yet the i r S

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Speaker 1: publishes it. But the fact of the matter is if

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Speaker 1: you're making more income, that alone is enough to give

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Speaker 1: you a higher chance of having an audit. So would

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Speaker 1: you advise your clients or are other tax attorneys advising

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Speaker 1: clients to be less creative about how they lower their

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Speaker 1: tax bills. Well, at the end of the day, the

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Speaker 1: i r S is trying to administer a collection at

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Speaker 1: three trillions of taxes and they have fewer people to

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Speaker 1: do the at the job. So one of the reasons

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Speaker 1: why they're focusing on this or for their business reasons

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Speaker 1: is the term. So absolutely the service wants people to

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Speaker 1: know that there's wealth squads out there focusing on on

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Speaker 1: people with very complex tax affairs. But my advice would

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Speaker 1: be to rely on your your cp A, your enrolled

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Speaker 1: agents that's preparing your returns. And if it's too good

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Speaker 1: to be true, it sounds too good to be true,

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Speaker 1: maybe it is. We have about thirty seconds here. What

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Speaker 1: what about repatriation? Yes, I'll tell you that a lot

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Speaker 1: of taxpayers are just and these are people that are

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Speaker 1: in audits and the tires have been kicked the last

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Speaker 1: couple of years. People are very interested to see what's

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Speaker 1: going to happen with with some benefits for repatriation, like

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Speaker 1: is it possible to wait and have a better environment

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Speaker 1: to repatriate money. But I'll tell you one of the

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Speaker 1: things that the I R. S Is looking at is

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Speaker 1: do you have offshore accounts? Were their transfers outside of

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Speaker 1: the US. So you know that's gonna be something they're

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Speaker 1: going to be looking at. But it's also going to

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Speaker 1: be something that taxpayers are looking for a potentially in

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Speaker 1: the future to maybe bring back some of that money.

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Speaker 1: We'll see what happens as taxis and approaches. Thanks so

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Speaker 1: much for joining us on Bloomberg Law. That's Corey Steigel

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Speaker 1: of Hochmann, Salkin, Reddick, Tosher, and Perez