IRS Hoping to Unmask Tax Strategies of High Income Taxpayers and Their Private Foundations
High-income individuals and private foundations will have more to worry about on July 15 than just filing tax returns and making tax payments. On that day, the IRS will open the floodgates on examinations of the income tax returns of hundreds of individuals reporting high income as well as the Form 990-PF returns of private foundations. According to the commissioners of two key IRS divisions, the IRS plans to start hundreds of examinations of high income individuals between July 15 and September 30. Simultaneously, the IRS intends to increase the audits of private foundations — which often are founded by those same high income taxpayers.
Under the People First Initiative, the IRS suspended many collection and examination activities due to the COVID-19 outbreak. That moratorium is set to expire July 15.
While details of the forthcoming audits are scarce, the IRS executives have indicated they will leverage the use of data analytics to coordinate the audits of related entities and individuals. Based on these comments, we expect the IRS to scrutinize transactions between private foundations and their founders and other closely connected individuals for evidence of “self-dealing” or other potentially problematic transactions.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.