Inflation Reduction Act May Double Number of IRS Audits for High Net Worth Individuals, Corporations, Estates, and Others

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Soon after the US Senate’s passing of the Inflation Reduction Act on Aug. 7, analysts began evaluating the final bill to judge its impact on taxpayers. The Act intends to raise revenue by increasing the IRS budget dramatically.

The Act may increase the number of IRS audits by adding up to 87,000 new employees to an IRS workforce that faces a large wave of retirements this decade.

While taxpayers should always do their best to file correct tax returns, it can often be difficult for high net worth individuals, estates, and corporations as taxable events are commonly very difficult to understand and subject to interpretation, making their audits lengthy and often ending up in Court. Working with inexperienced CPAs and attorneys can often only make matters worse, making it important to have an experienced attorney supervising from the very beginning of the audit.

Once a taxpayer, corporation, estate, or individual receives a notice of audit, the information and documents requested by the auditor must be immediately gathered, remembering that the preparer and any tax planner might have a conflict of interest making it wise to engage an outside attorney to supervise the tax return preparer and anyone assisting him.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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