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Tax Focus 2010: Are You Ready?

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In recent reports to by IRS Commissioner Doug Shulman and members of the IRS at the ABA, news releases and pretty much to anyone who will listen, enforcement is on the rise. What does this mean? Well in order to enforce, one must first figure out what is owed. Since there are so many of us out there who have either self-reported and not paid, or are just waiting to get caught, our time has come. The IRS has increased the number of audits, they have increase the number of agents and they have shortened the time to make it all happen. The IRS says it has smartened its approach. What does this mean? Well here are some of the areas of their intended focus and attempts at implementation:

  • Global High Wealth Audits: In the past, examiners only focused on the year and form being examined and would not go beyond this document. This is no longer the case. The IRS will ask for that Form K-1 and similar documents that suggest and indicia of ownership and depending upon the level of interest and access to specific books and records, they will ask for that too. This will initially begin with individuals with $10M or assets or income. Once they figure out what the uber-rich are up to, they will use these skills on the rest of US taxpayers.
  • International Enforcement and Detection: The more than 14,700 disclosures from the FBAR voluntary disclosure program will be used to identify financial institutions, advisors, promoters and other facilitators for US persons hiding assets and income offshore. The long term expectation is for the next 10 to 30 years. Those who filed under the voluntary disclosure program will become part of the US tax system going forward.
  • Paid Tax Preparers: The IRS plans to require registration, minimum competency testing and continuing education. Once the testing process is set up, the IRS is to create public databases. This is combined with their plans to visit thousands of preparers and discuss operations and ways to reduce error rates.
  • Business Taxpayers: Taxpayers with financial statements prepared under FIN 48 or other similar accounting standards with assets over $10 million will be required to report uncertain tax positions at the time of filing. A brief description of the position and the maximum US tax exposure will be needed.

With the rise of employment tax audits added to the mix, the name of the game? Buckle up Dorothy, because it is about to be a wild ride…