Focusing on Audits of S Corporations.
The IRS has known for years that S
corporations are sometimes used to circumvent federal income and
employment taxes. Despite this, relatively few S corps and
shareholders have been audited in recent years. However, things are
changing. The IRS has announced that the number of S corps has
"exploded" in the last 20 years and it plans to increase scrutiny of
businesses that operate this way. In other words, S corps and their
shareholders are no longer flying beneath the IRS radar.
IRS Attacks High
If you're a high-income taxpayer, the IRS has its
audit antennae focused on you.
The number of audits of taxpayers earning income of $1 million or
more jumped 33% to about 17,015 audited returns in the fiscal year
ended Sept. 30, 2006up from 12,835 such audits a year earlier.
That amounts to about 1 in every 16 U.S. millionaires, Mark Everson,
the IRS commissioner, said in a telephone news conference
Taxpayers with income of $100,000 or more (including
millionaires) faced 257,851 audits, up from 219,208 a year earlier,
representing almost 2% of all such returns.
Overall, audits of individual taxpayer returns jumped more than
6% to about 1.3 million audits in fiscal year 2006, from about 1.2
million a year earlier. The IRS fiscal year ends Sept. 30, 2006
That's less than 1% of all filers.
For the individual filers audited, about 990,700 were
correspondence audits, and about 303,000 faced in-person audits.