At the end of June, the Commissioner of the IRS Large Business and International Division announced a new campaign to audit high-net-worth individuals and the entities (such as partnerships, corporations, trusts, and private foundations) associated with them. The audits will be conducted, along with coordination with other divisions, by the Global High Wealth Industry Group (known as the “Wealth Squad”), a division of the IRS that was formed to look holistically at high-net-worth individuals in conjunction with entities that they control. The IRS plans to initiate hundreds of new audits between July 15 and September 30, 2020.
In conjunction with this announcement, the Commissioner of the Tax-Exempt and Government Entities Division (“TE/GE”) of the IRS confirmed that she anticipates increased audits on private foundations. The IRS has indicated that more than 1,000 private foundations with links to high-net worth individuals have been identified and will be examined, and the TE/GE division has substantially increased its training regarding the use of private foundations in tax planning.
Private foundations and high-income individuals with a connection to them should anticipate the following issues may arise through an audit and prepare to address them: