EFTA01118570.pdf

.• • . .... • P30 his How the IRS Is ye m. fa Probing the Rich th Si g one person-it's a team with are as;' The feds are auditing exper- says By Karen Rube tise in a number of THE INTERNAL REVENUE SER VICE IS Alan Kufeld, -off ice a gro prin up at cipa the l adV in nearly 20% of those f: the isor y tax- family corning down hard on wealthy payers these days-and not ts. . just fwm Rothstein Kas s in New Yor earning more than k. s There are a number of trigger $10 million a year. se who hav e fore ign acc oun hom e in tho e that may lead the.IRS to In an attempt to recoup som on a- taxpayer's returns. Her e • of the $350 billion in taxes the federal government estimat es is _.„ Protect yourself. ' r but not coll ecte d; due each yea ey is goin g whe re the mon the IRS ST- is: to folks with fat bank accounts, Property Transfers: pricey proper ties , big incomes, The IRS is digging up .1 larg e inve stm ents and com plex tax property-transfer records in many stat es and -che ckin g to see profiles. While the audit rate for the if corresponding gift-tax re- general population of taxpaye rs turns have been filed. was 1.1% last year, it.11 2.5 8.4% for • Making a gift of taxpayers With income of -up more property to heirs has than $1 mil lion , and 18.4 % become far more papa- ' from 10.6% the year prior-fo r far since housing values those brin gin g in. $10 . nall ion or began declining in more. With the crackdown' on 200G, because lower the- Wealthy still in its infa ncy -. values reduce the ' it was-jus t last yea r tha t the tax consequences IRS started ramping up its"' ' to the giver and alth Ind us; the heirs stand Global High We to enjoy any . try unit, staffed with the icat ed', future appre- ; agency's most sophist ciation of the 4-) auditors —the audit rate is property. likely to climb higher. A gift-tax '¶'We Want to make ware return must ,- we have a meaningft.1DrL.: be filed, for encethroughc;i.)t the inC(1.7.0 any gift val- spectrum?" says Steve ued at more Miller, deputy cemmissio"...e than the an- for services and enforce- nual $13,000 ment. gift-tax exclu- A traditional audit Mon. But that, involves a single au- doesn't neces- ditor reviewing ' a sarily mean that Form 1040, used by taxes must be individuals to report an- who - income. But for a wealthy look at a give more than, the -.2 taxp r "you can't just aye t 1040 and know wh at's goin gronr ' giftrtax exclusion. can Ska rlat os,, a tax attor- avoid the .35% gift tax o says Bryan ney at Kostelanetz & Fin k in by tapping the one- New York.' time estate-tax exemp- Now, with its new wealth uni t,' tion, which is much com e•in .Wi th i .the IRS doesn't just , EFTA01118570  "The lo a n in jo int filings. sit- equity are many IR S b e lieves theree limitation Is - higher ugh last where th ourt- years thro tal of $1 uations adhered to," Bec For nine a -t o ein g could use ons not b ays. year, you estate -tax exempti n e y s $1.1 milli on in million of ing. " If you take rest rate, that for gift-g iv ext year, a 6% inte Any o r th is y ear and n lion or debt, at $66,000 of interest. ise F $ 5 m il u ld b e to ra ption is the wo t starts the exem for couples. Once n more than tha n mortgage inter- $10 mil li o n p, you c a h e is used u ions." W ceed $70,000, the s quest x exemption idi as $13,000 to a e est deductions e take a second iv e a s m s y o u li k li k e ly to g ividuals a ) IRS e adds. is many ind 26,000 for a couple lo o k, h ($ each year tax. t ay e: free of gif yone who gave aw 1 Foreign Incom ll-publicized am- fo r a n a n $ 's w e with So y v a re th lued at mo and didn't The IRS fo r taxpayers ded pro p e rt rs pro g ra m en recent yea ay nesty ign income Million in x return, the IRS m s unreported fore payers who run file a gift-ta g to collect penaltie nd tax n- lo o k in e s. Sept 9, a e rules mn foreign-i ly m e ta x th t o n co st on unpa id afoul of now risk n o and intere c o m e reporting t also jail time. , Losses: nalties bu ht to e rt a in In vestment out false stiff pe S is going straig like C is sniffin g The IR ent firms . The IRS estment losses by banks and investm demand the inv ra- to claims of ubchapter S•corpo C re dit Suisse ents with foreign rs o f S • - .S. c li up owne r partnerships. - in an- n counts. ames of U o tz in ti o n s lk s in ve st c Kostelane W h en these fo iness, the law a Says Skarlatos of the IR S iee o th e r, se condary buSsses incurred in k : " N o t. only is ned ac- re-, using lo eir & F le who ope prohibits Offset income in th - !Coking at peop and, but in coun- it to . or pa rt witzerl g of. from pter S corporation tively' counts in S India, Israel, Hon - S u b c h a a re a c li k e in g e n has they tries r East hip, unless ary bust - Kong and the Fa Mu-. ners lved in the second lucs invo s, that eral." in ness. mong other thing partic- : wer A ast 500 ho urs of • -Spenders rograin launched e a n s a t le - a n e w p heck- the m a ti o n e a c h y ea r. im e a tt o r- In r, th e IR S is cross-c omes nces ip be a -f u ll -t this y e a orted in c and "You couldsted in a car washers ing taxpayer? rep rd records. • in v e 0 u rt - d it -c a y who il.Bec eir cre orld tand ne owner," says -Ne ting firm with th you took a luxury w dest a 5 % a c c o u n S o if a m o any er at u drew y, a partn , N.J. a year yo lastic, rpm- ne Cohn in Roseland ed on a tour in nd left a trail on p tax J .H . v o lv m e a o u r the ren't in inco efend y "If you a and" the car wash be prepared to d these credit- s an gular basi s, "you c . Through pes to ft-tax re s a loss," he- say ffset other return hecks, the IRS Mo rupu- tj ansg ru n to o c n sc (s -must ly use:the losses - card among others, u t active in sed by cl for on ssive income; hut no . Taxpay- snag, rs of Schedule C, u and fees). a e ss le ts 1 val- p e from your busin t and loose lous fi ers reporting profi net the c o m fa s p a y . • more etimes ey tax sinesses . filers yo1 ra are som , saying th s from bu ie an- e en it tomes to this siness when losse in all, Schedule C t 51% Hee h 13;000 w re involved in a bu • All ort jus w e y ." e s ti n ia ted to rep g -some $68 - exelu- 't reall are come, leav in ey weren of their in paid taxes each ye ar. lbeed t that th e d u c ti o n s : in u n e c te d eiy.• teres t d billi o n un c o ll ncees- o m e-loan in s for interest on . In view of the d, and the in tha t H tion kin Big deduc home-equity loans taxes of every at for every at be a g e s a n d m a te th enient, mortg - r•red flag. ortgage in- IRS's it spends on eriforc 0, it's esti irs who a m a jo are s for. m dollar uch as $1 an the deduction wable for as much it brings in as m cy's latest fo- ion c a n - all o l ageli terest are d Si million of tota n o w onder the ig money. is gift in e n d b as a comb t and seco is on th e ye. one.- indebtedness on. firs on a home- cus exemp- $100,00 0 mni, plus much ho - EFTA01118571