The aggressive compliance landscape started several years ago and slowed down due to Covid-19. However, in recent months tax practitioners are seeing an increase in compliance efforts and controversies throughout the world. It started in January 2017 when the IRS began a new approach to examination where they were targeting campaign issues that they think have potential for noncompliance. For example, the IRS began to target Code Section 965 which affects a lot of taxpayers. They also have the high-wealth initiative, which targets very wealthy individuals not only around the US, but around the world.
This high-wealth initiative is run by a group in the IRS called the ‘Wealth Squad.’ They identify high-net-worth individuals using whistle-blower type information and data scientists who provide them with many leads. The IRS invested time and money to develop data analytic tools and employs many data scientists who create algorithms to comb through authentication documents. For example, these tools can look at a taxpayer’s financial statements with the bank and discover if the income in the bank matches the income reported on the tax return. Before these data analytics tools, this bank information would stay with the bank and was more difficult to be discovered by the IRS.
Every taxpayer should be sure that the information on your credit information should be verifiable with the information on your tax return. The ‘Wealth Squad’ has access to all information they did not have access to before. This new information combined with their data analytics tools gives the IRS the power to unravel extremely complicated situations that they were not able to understand before.
If you have any questions or concerns, please do not hesitate to contact us.