Rich Taxpayers Beware Uncle Sam Wants You

The IRS commissioner announced his plan to redeploy agents to concentrate on wealthy taxpayers; secret statistical formula to be applied.

By David A. Semanchik, Esq.

Give credit to the Internal Revenue Service for listening to its critics, researching its methods and retooling its operation for optimal performance.

After the New York Times reported that the IRS was paying more attention to rank-and-file wage earners than those whose income comes from businesses and investments, where fraud is more prevalent, IRS Commissioner Charles Rossotti investigated his agency and found that claim to be true.

So he decided to shake things up.

Last month, Rossotti announced that he is redeploying agents to concentrate on wealthy taxpayers whose income comes from their businesses and investments.

“The fact is people who make more than $100,000 pay more than 60 percent of the taxes and we need to focus there,” Rossotti told the New York Times.

Rossotti said his agency will concentrate on taxpayers whose schemes vary from complicated currency trading to simply refusing to pay taxes by claiming those payments are voluntary.

What’s more, the agency has developed a “secret” statistical formula intended to collar tax cheats whose income is above $100,000 per year.

New agents recently hired by the IRS are also supposed to help bear the burden of auditing additional wealthy taxpayers, whose returns are often much more complicated and labor-intensive than average returns.

Recent indictments and sentences seem to allude to the tax-collecting agency’s recent priority shift:

• Stephen Kent Morehead, vice president of Chartwell Healthcare, Inc., pleaded guilty to failing to file a joint income tax return for the year 1997.  His previously unreported income was $113,000.
• Jose Sardinha, the owner of a chain of Massachusetts Dunkin Donuts, pleaded guilty to an elaborate scheme constructed to hide income from the IRS. According to information from the prosecutor, Sardinha participated in a kickback plan with West Lynn Creamery in which the creamery overcharged Sardinha for dairy products and then refunded the overcharged amount.  He attempted to conceal $126,000.
• Alvin C. Lostetter, a former anesthesiologist, pleaded guilty to failing to file federal income tax returns for the years 1996 to 1999.  He owed $268,912 in taxes on $1.3-million in income.

This action is but the latest in a string of changes at the IRS intended to bolster its reputation for being aggressive on tax cheats.  If you are among the nation’s wealthiest taxpayers, you could be next.

Are you prepared?

David A. Semanchik is a Tax Resolution Specialist, a member of the American Society of IRS Problem Solvers and a New Jersey licensed Attorney.  You can contact him at 732 240 4055 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.