Global High-Wealth Exams among IRS July Priorities
July 15th – a deadline and a kick-off dateAnchin Private Client CenterJuly 15, 2020
July 15th is an important date this year since it is the updated deadline to file individual tax returns. Furthermore, the IRS recently announced its campaign to audit High Net Worth (HNW) individuals is starting on that date.
During the COVID-19 pandemic, many companies and organizations made concessions and allowances in the spirit of helping people get through trying times. Among these programs is the IRS’ “People First Initiative” which concludes on July 15, 2020. On that date, the moratorium on investigations and collections enacted on April 1 in response to the Coronavirus pandemic expires. Additionally, the IRS announced that they will prepare to examine a group of tax returns of high-income individuals.
High Net Worth individuals, especially those with international holdings, should be prepared
The IRS focus will primarily be on targeting any foreign aspects of an individual’s return. Individuals with non-U.S. assets and income including, but not limited to, offshore accounts, foreign trusts, and entities controlled by the taxpayer, such as partnerships, corporations, foundations, and trusts.
These individuals should expect greater scrutiny of partnerships and other pass-through type entities, private foundations and overall international activity.
During a June 2020 web conference, the IRS’ Large Business and International Division Commissioner, Douglas O’Donnell, approximated that between July 15 and September 30, several hundred audit exams will commence. In connection with the division’s Tax Cuts and Jobs Act (TCJA) compliance campaign, each case is slated to involve a large amount of information sharing and include high-income individuals as well as related entities (such as a pass-through).
An increase in audits of private foundations in accordance with a related compliance strategy involving private foundations and loans to disqualified persons has also been signaled.
If prior audits are a guide, if selected, an individual should be prepared for an exhaustive and lengthy audit by the IRS.
Individuals with international tax issues or private foundations may want to consider a review of their exposure on these matters. We are here to help. For more information, contact your Anchin Relationship Partner or a member of Anchin Private Client at firstname.lastname@example.org or 212.840.3456.