According to Michael Rozbruch, founder and CEO of Tax Resolution Services, few A
ID: 2455297 • Letter: A
Question
According to Michael Rozbruch, founder and CEO of Tax Resolution Services, few Americans are subject to a second look from the IRS. In fact, audits are one of the few times that having an average salary is an advantage. "Only about 1.1 percent of people who file a 1040 [the most common tax return] for the 2010 tax year were audited ... [or] about 1.5 million," says Rozbruch. "However, the audit rate is 12.5 percent for people earning $1 million or more in 2010. This is up by 100 percent from 2009 levels! The IRS is aggressively going after this segment of the population. A relatively small percentage of returns are audited. Do you think this percentage should be higher or lower? Why?
Explanation / Answer
Each year, the Internal Revenue Service (IRS) conducts audits on individuals and businesses to ensure that they are in compliance with U.S. tax law. The percentage of people and businesses subject to these audits is relatively small.
Indeed, many business analysts believe that smaller businesses in certain industries are at greater risk of being subjected to an audit because of historically higher levels of noncompliance in those industries, many of which are primarily composed of small firms.
When providing advice on IRS audits, tax advisors counsel small business owners to adhere to the following guidelines:
According to my view, this percentage should certainly be higher due to increasing non - compliances and tax frauds. Other reasons are: