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IRS Data Shows ‘Clusters’ of Potential Tax Evaders in Five Cities

Author: Frank L. Brunetti|April 26, 2013

IRS Data Shows ‘Clusters’ of Potential Tax Evaders in Five Cities

Internal Revenue Service data analyzed by the National Taxpayer Advocate sheds light on five metropolitan areas in which the likelihood for tax evasion – and audits for potential tax evaders – is the highest.

The Associated Press provided an exclusive report on the study’s findings, which reveal that small business owners and individuals living in wealthy areas of Los Angeles, San Francisco, Houston, Atlanta or the District of Columbia, are the most likely to undergo an audit for possible tax law violations. The confidential data is used by the IRS to make determinations about which entities and individuals to target for audits, the AP reports.

Many of the specific neighborhoods targeted, such as Beverly Hills and Newport Beach, California, are likely targeted due to the high incomes of their residents, which increases the potential risk of an audit. Further, many residents of these areas are small business owners, which tend to be areas of interest for the IRS because many small entities deal in cash and have greater opportunities to alter their taxes than individuals, the news source said.

A separate IRS report indicates that budget constraints may lead to fewer audits in 2013, particularly for large corporate entities. However, smaller companies and high net-worth individuals may continue to see a consistent stream of auditing as the IRS attempts to close the federal tax gap.

IRS Data Shows ‘Clusters’ of Potential Tax Evaders in Five Cities

Author: Frank L. Brunetti

Internal Revenue Service data analyzed by the National Taxpayer Advocate sheds light on five metropolitan areas in which the likelihood for tax evasion – and audits for potential tax evaders – is the highest.

The Associated Press provided an exclusive report on the study’s findings, which reveal that small business owners and individuals living in wealthy areas of Los Angeles, San Francisco, Houston, Atlanta or the District of Columbia, are the most likely to undergo an audit for possible tax law violations. The confidential data is used by the IRS to make determinations about which entities and individuals to target for audits, the AP reports.

Many of the specific neighborhoods targeted, such as Beverly Hills and Newport Beach, California, are likely targeted due to the high incomes of their residents, which increases the potential risk of an audit. Further, many residents of these areas are small business owners, which tend to be areas of interest for the IRS because many small entities deal in cash and have greater opportunities to alter their taxes than individuals, the news source said.

A separate IRS report indicates that budget constraints may lead to fewer audits in 2013, particularly for large corporate entities. However, smaller companies and high net-worth individuals may continue to see a consistent stream of auditing as the IRS attempts to close the federal tax gap.

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