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In recent decades, the IRS has come under fire from prominent critics who have alleged that they focus far too much on audits of low-income taxpayers while ignoring those in the highest tax brackets, where the amount of money involved is far greater. Partially in response to this, the IRS has greatly increased its audits and investigations of high-income taxpayers in the last decade and even introduced a team of tax collectors explicitly aimed at targeting fraud and underpayment of taxes by the wealthy. While their official name is the “Global High-Wealth Industry Group,” they are informally known by those in the tax industry as the “Wealth Squad.” At the Tax Law Offices of David W. Klasing, our skilled tax lawyers have years of experience dealing with audits of high net worth individuals. They can help you successfully navigate a potential audit or criminal tax investigation by this group, or any other IRS group, if one occurs.
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As noted above, the Wealth Squad, or the Global High-Wealth Industry Group, was formed by the IRS in 2010. The Wealth Squad focuses on audits and criminal tax investigations of the tax returns filed by taxpayers in the highest income brackets. The philosophy of the group was “to take a holistic approach in addressing high-wealth taxpayers to view the complete financial picture of the taxpayer and the enterprises that they control,” including partnerships, trusts, corporations, private foundations, and other interests.
There are certain types of organizations that the Wealth Squad has targeted in particular. One of their main targets has been partnerships. In addition to other pass-through entities, such as S corporations and disregarded entities, partnerships have, in the past, been commonly used by high net-worth earners to commit tax fraud by sheltering income and claiming deductions for which they are not entitled, among other misdeeds.
The Wealth Squad got a boost in this area when the bipartisan Budget Act of 2015 overhauled partnership audit rules to make it easier for these entities to be audited. If you are involved in a partnership or other pass-through entity, you should always seek the advice of an experienced Tax Attorney like those at the Tax Law Offices of David W. Klasing before filing your tax returns, as we can help you avoid red flags that could get the Wealth Squad’s attention.
Individuals with private foundations in their name, or the name of their family or business, are also frequent targets for heightened scrutiny by the Wealth Squad. While many high net-worth individuals use these foundations for genuinely charitable enterprises, there have also been numerous incidents where private charities have been used as havens for tax fraud and other misconduct. If you have such a family or business foundation, it is vital to speak with a tax professional to understand your reporting obligations and what does and does not qualify as charitable giving.
The final major big area of concern for Wealth Squad investigators is high-income individuals and couples with money or assets stashed in foreign or offshore bank accounts. There are numerous reporting requirements associated with such accounts, including filing an FBAR each year. The IRS takes very seriously those who fail to comply with such obligations, especially if it is a deliberate attempt to shield themselves from tax liability for their offshore income. Fortunately, there are voluntary disclosure programs for both willful and non-willful violators of FBAR filing requirements to be brought back into compliance. If you enter them before an audit or criminal tax investigation by the Wealth Squad or any other IRS department begins, you can receive a near-guaranteed pass on criminal tax prosecution.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed returns coupled with affirmative evasion of payment) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney-Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one-stop-shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
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On June 18th, IRS Large Business and International (LB&I) Division Commissioner Douglas O’Donnell announced that a long-planned crackdown on high net-worth earners, delayed by the pandemic, is set to begin on July 15th with examinations of several hundred high-income taxpayers. The stated goal of this endeavor is to bring multiple IRS divisions, including the Wealth Squad, together to address the sophisticated planning and complicated workarounds often used by high-income earners looking to avoid paying their fair share of taxes. This initial round of audits will be followed by others, likely involving greater numbers of taxpayers.
If you are one of the hundreds of high-income taxpayers who have already received notice of an upcoming audit, you must contact an experienced tax lawyer like those at the Tax Law Offices of David W. Klasing as soon as possible so we can get to work trying to mitigate any damage that has already been done. If you have yet to be contacted by the Wealth Squad or another IRS criminal tax investigator, but you are a high net worth earner who knows there could be problems if you are audited, you should also reach out quickly. The sooner you retain the services of a skilled Tax Lawyer, the better chance you have of working out a deal to enter into a voluntary disclosure program or some other means by which you walk away with the least amount of damage to your life.
The Wealth Squad has been around for quite a while now, and they know what they are doing when it comes to catching high-income taxpayers committing complex tax fraud schemes. With the IRS’s renewed focus on high-income earners as a whole, the Wealth Squad is likely to ramp up activity even more in the coming months, especially in the wake of the backlog built up during the pandemic. At the Tax Law Offices of David W. Klasing, we have many years of experience successfully helping our clients through the audit process and leading their cases to the most positive possible resolution. To set up a consultation, call our firm today at (800) 681-1295.
Regardless of your business or individual tax needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.
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