The Internal Revenue Service’s (IRS) moratorium on various investigations and collection actions is set to expire on July 15, 2020 at which point the IRS will begin aggressively pursuing high-net-worth individuals.
On June 18, 2020, on a web conference sponsored by the New York University School of Professional Studies and CPA Academy, Douglas O’Donnell, Commissioner of IRS Large Business and International Division (LB&I) announced that “we will move to start the examination of several hundred individuals who have high income, and we expect that between July 15 and September 30, several hundred [examinations] will be started.”
These new examinations will be accompanied by a new IRS perspective as to how to effectively, and completely, examine high-net-worth individuals. More specifically, the IRS will be taking a more holistic approach and reviewing an individual’s entire business enterprise by coordinating its examination efforts with IRS groups outside of LB&I where, in the past, this coordinated effort may not have occurred. This enterprise approach may result in a multi-faceted, simultaneous, examination of all aspects of an individual’s business operations including any pass-through entities, trusts, retirement plans, and private foundations in which an individual has a financial relationship.
In this new environment, it is important that the high-net-worth individuals understand how this IRS initiative may impact them and their related entities and enterprises, and begin to assess what steps should be taken to prepare for, and defend against, an examination.