Taxpayers should be aware of increased audits — Bloomberg News recently reported about the increasing number of audits conducted on high-net worth individuals. While overall audits have decreased, the IRS is focusing their time where they feel they can get the most bang for their buck. Historically known for utilizing more complex tax strategies, it’s important that high-net worth taxpayers make sure their support documents are readily available to backup potentially aggressive claims.
A representative of Deloitte has listed the IRS’s “favorite issues” of focus. The list includes:
- Large business losses
- Mortgage interest deductions
- 529 college savings plans
- Schedule C losses that should be characterized as Hobby Losses
Additionally, the IRS is distributing mass notices that address specific issues. For example, taxpayers claiming large charitable deductions should expect an automated notice requesting support. The best practice for addressing any notices or audit requests that come up is to respond promptly and with thorough support. Should you find yourself on the receiving end of an audit, please reach out to your accountant for support.
For questions or more information, please contact our tax advisors at 301.231.6200.