Trusts and Estates > Estate Planning > New IRS Holistic Audit Program

Jul 1, 2010 12:00 PM

New IRS Holistic Audit Program

How high-net-worth individuals can plan defensively

By Stephanie E. Heilborn, Kathryn Keneally & Lindsay H. Brown

The federal government recently has enacted several laws increasing the reporting obligations of both U.S. resident and non-resident taxpayers and imposing additional taxes and penalties on non-compliant taxpayers. But how can the Internal Revenue Service be sure that taxpayers are fulfilling these requirements? The IRS has unveiled a new “holistic audit” program designed to increase compliance among high-net-worth individuals. Let's look at the program, the legal framework underpinning the program and how taxpayers and their advisors can plan defensively for a holistic audit.

IRS Commissioner Douglas Shulman announced the creation of the program in a speech before the American Institute of Certified Public Accountants in October 2009.1 The IRS perceived that it was difficult to assess the overall tax compliance of wealthy individuals, due to their sophisticated business and investment arrangements and the attendant complicated, and often opaque, legal structures requiring many different tax returns. The IRS realized that it could no longer audit each tax return in the enterprise as a single and separate entity and that it needed to examine the returns of wealthy individuals as a whole.

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