Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Monday, February 19, 2024

Here's What's Raising Red Flags With IRS Auditors In 2024

Estate planningThe IRS intensifies scrutiny on high-net-worth taxpayers, prompting advisors to emphasize the importance of watching for audit triggers during the current filing season. Increased audit notices requesting detailed records and explanations are observed by CPA firms, indicating higher audit probabilities than in previous years. 

The Treasury Department's directive to the IRS is to prioritize enforcement efforts on large corporations, high-income individuals, high-net-worth individuals, and complex pass-through entities, aiming for high-dollar non-compliance cases. The IRS mainly targets discrepancies in balance sheets of partnerships with over $10 million in assets; foreign asset reports exceeding $10,000, and payments from construction contractors to apparent shell company subcontractors. Additionally, large deductions or tax credits disproportionate to income and unreported income are under scrutiny. 

Digital assets, especially cryptocurrency transactions, are also raising red flags. Wealthy individuals with closely held businesses are at heightened risk of full audits, as the IRS increasingly relies on digital verification methods but faces challenges in matching income and deductions from sole proprietorships reported on Schedule C.

For more information see Jeff Stimpson “Here’s What’s Raising Red Flags with IRS Auditors in 2024”, Financial Advisor, January 29, 2024.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2024/02/heres-whats-raising-red-flags-with-irs-auditors-in-2024.html

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