Obama making life difficult for high income earners

This is one way to raise the effective tax rate for individuals, raising the probability that you will be audited.

If your income is high, your chances of getting a visit from the Tax Man are on the riseā€”and there isn't much you can do about it.

Last year, the Internal Revenue Service sharply increased face-to-face audits of upper-income taxpayers, according to data released Thursday. For taxpayers reporting income above $200,000, so-called field audits rose 34% in fiscal 2011 to 78,392, from 58,521 in fiscal 2010. (The IRS fiscal year begins on Oct. 1.)

Field audits, which are conducted by an agent, are often more in-depth than "correspondence" audits, which are conducted by mail and sometimes involve a single issue. Overall, the agency audited 3.9% of taxpayers with income above $200,000, up from 3.1% in 2010.

The increase in field audits for taxpayers reporting income over $1 million, though smaller, was still significant: 24%, for a total of 20,475 in 2011, versus 16,509 in fiscal year 2010.

Overall, the agency audited 12.5% of taxpayers reporting income over $1 million, compared with 8.4% in 2010. . . .

The Obama administration claims:

"We are looking more at taxpayers at these income levels because we find more issues there," says IRS Deputy Commissioner Steve Miller. . . .

But assuming that this error rate is true, it wouldn't be surprising simply because these people have more complicated taxes. Even the IRS makes mistakes on interpreting these complicated rules and they claim that more money is owed even when it isn't.

The bottom line though is that these efforts don't seem to be raising more money.

Overall, the IRS collected slightly less revenue from enforcement efforts in 2011, $55.2 billion versus $57.6 billion in 2010. Mr. Miller attributes the drop to anomalies, such as several large cases that were closed in 2010. . . .

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