In response to a report from the Transactional Records Access Clearinghouse (TRAC) criticizing its relatively new Global High Wealth Industry Group (GHW), the Internal Revenue Service (IRS) recently reaffirmed its commitment to reviewing returns of high net worth individuals and their related businesses and entities. According to the IRS, GHW has more than 100 enterprise cases under audit now, with those audits involving the review of more than 500 returns. More cases are in the pipeline and the IRS has indicated that it will continue focusing on this area.
GHW audits differ from traditional audits of individuals. GHW and its 101 revenue agents are part of the IRS’s Large Business & International (LB&I) Division, which means that audits are being conducted similar to large corporate audits. Individuals targeted by GHW will receive notice of the examination and will be requested to sign a detailed audit plan covering topics such as audit expectations and response time frames. The initial Information & Document Request is massive, requesting detailed responses and documents related to almost every business and investment activity of the individual and any related entities. The IRS normally will follow up with even more detailed questions after reviewing the initial information provided.
Individuals facing the prospect of a GHW audit need to be prepared for this more intrusive type of examination and should consult their tax advisor to determine the best course of action. For example, depending on the situation, some individuals may want to consider a pre-audit of the relevant tax returns that will be subject to review or begin gathering relevant business and investment information.