7 Dangerous New IRS Enforcement Threats in 2012 – BEWARE!

We want to share with you the very latest on how Obama’s IRS goes about selecting audit targets. It’s vital you are aware of the clever new schemes America’s tax collectors are launching to dredge up every dollar they can to fund government deficits.
Make no mistake – even law-abiding taxpayers will need to be on guard in 2014… and this briefing will help you prepare.
To battle the tax gap, each year the IRS conceives and implements plans they call “compliance initiatives.” Compliance initiatives are specific enforcement projects pointed at certain patterns of behavior the IRS detects in various segments of the population. Here are the hot compliance initiatives on the table now:
  1. Offshore assets. The IRS is increasingly obsessed with tracking down and taxing the income earned on assets held in offshore bank and securities accounts. Along with the Justice Department, the IRS is aggressively pursuing these accounts.
  2. Small business audits. The IRS recently completed its National Research Program audits on sole-proprietor Schedule C filers and small business corporations. With these research audits completed, the IRS has updated its Discriminate Income Function (DIF) scores, the primary measure of whether a return will be audited or not. The IRS is convinced that the largest segment of unreported income is attributable to the self-employed. So that’s where the agency is attacking.
  3. Employment tax enforcement. Since the issuance of the 2009-2013 Strategic Plan, the IRS has made employment tax enforcement a strong priority. In the past couple of years, there’s been an explosion in the number of employment tax prosecutions. The IRS is targeting employers who:

    1. cascade employment tax burdens, and
    2. follow tax protestor arguments in failing to withhold taxes from employees.

    The IRS has also targeted subchapter S corporations for employment tax liabilities in connection with compensation to corporate officers.

  4. Expanded AUR Program. The IRS is expanding its Automated Under Reporter (AUR) Program to include more types of income. Historically, the program focused on wage income, interest, and dividends. Now the program is broadening to include more Form 1099 reporting. As part of the program, the IRS is using more “soft notices” to communicate potential underreporting issues. These are notices that announce a “possible” problem. The notice asks the citizen to review his own return and amend it if necessary.
  5. Non-filer enforcement. Targeting non-filers has always been, and continues to be, a high priority for the IRS. The Automated Substitute for Return Program (ASFR) is responsible for millions of assessments each year. The IRS is now pushing Congress to amend code section 7203, the criminal penalty for willful failure to file a tax return. At present, the criminal penalty is a misdemeanor. However, the proposal would make multiple non-filing a felony. Under the proposal, the felony would apply when there is a failure to file for at least three of five consecutive years, if the total tax is at least $50,000.
  6. Increased criminal prosecutions. In this regard, the IRS has stepped up criminal prosecution activity over the past two years. Just last year, the agency completed 4,325 investigations, beating its goal of 3,900. The majority of its time is spent on “legal source” income cases. Criminal Investigation is spending less time each year on illegal income cases, such as organized crime, etc.
  7. Gift tax audits. The IRS has begun an aggressive campaign of ferreting out unpaid gift tax liabilities. Most people don’t know they can incur a tax on gifts they make to others. To capture these taxes, the IRS is actually examining property transfers recorded in the public records. The agency is looking for transfers that might potentially be subject to gift taxes.