IRS Enforcement Update

The Internal Revenue Service took a break from collections and examinations during the spring of 2020 in response to the COVID-19 pandemic, but as of July 15, 2020 all agents are back at work and aggressively making up for lost time.  New audit targets have been identified and taxpayers can expect to receive IRS audit notices as early as mid-August.  In the crosshairs are promoters of abusive tax shelters, high-income non-filers, and individuals with direct and indirect interests in “specified foreign corporations.” 

IRS appointed a new Promoter Investigations Coordinator to oversee initiatives designed to address the rise in popularity of identified abusive tax transactions.  IRS is specifically targeting promoters and is offering a “time-limited settlement offer” to certain taxpayers who participated in syndicated conservation easements and micro-captive insurance transactions.

On July 15, 2020, the IRS began a new campaign to identify and audit high-net-worth individuals.  In particular, IRS is looking at taxpayers with a tax bill in excess of $100,000 and is actively pursuing non-filers.  In addition, the IRS is analyzing data from pass-through returns filed after the implementation of the Tax Cuts and Job Acts to identify restructuring activities.  Taxpayers with high income from flow-through entities, especially those who have not filed individual tax returns, can expect contact from IRS, either in the form of a warning letter or an examination notice.

International tax reporting, especially the revised rules for reporting “transition tax” on untaxed foreign earnings, has always been complex and a source of potential reporting errors.  IRS agents have identified thousands of taxpayers with either a direct or indirect interest in a “specified foreign corporation” who will receive either warning letters or audit notices this fall.

Dallo Law Group offers full-service tax representation.  Whether you need assistance with tax planning, filing returns, or responding to an IRS notice, we are here to help. We have a team dedicated to helping with your COVID-19 tax and legal needs; feel free to reach out to us at (619) 795-8000.