(I got this email last week from Barbara over at SpringWell Financial, and I loved it so much that I asked her if I could share it with y’all. She said no, but I’m gonna do it anyways! Haha… nah, of course she said it was okay. I’m too much of a wuss to do something illegal like that anyways ;) Hope you learn something about taxes today!)
The outlaw Willie Sutton stole an estimated $2 million over a 40-year career robbing banks — and scored the ultimate “success” in his business, living long enough to die of natural causes. Sutton always carried a pistol or Tommy gun with him on jobs, declaring “you can’t rob a bank on charm and personality.” But the gun was never loaded, because, as he said, someone might have gotten hurt! And he became legendary, ironically, for something he never actually said.
According to the story, Sutton was asked why he robbed banks — and replied “because that’s where the money is.” But in his 1976 autobiography, Where the Money Was: The Memoirs of a Bank Robber, he confessed that credit for the line belongs to “some enterprising reporter who apparently felt a need to fill out his copy.”
What does a depression-era bank robber have to do with taxes? Well, the IRS estimates that outlaw taxpayers cost the Treasury $385 billion per year in uncollected taxes — roughly 15% of the amount they believe is due under current law. So they work hard to close that gap. In FY 2011, the IRS employed over 22,000 revenue officers, revenue agents, and special agents. They conducted 391,621 “field” audits and 1,173,069 less-intensive “correspondence” audits. They filed levies on 3.7 million taxpayers and filed over a million liens. But they can’t turn over every rock. So how do they case their targets?
Earlier last month, the IRS released their FY 2011 Enforcement and Service Results revealing how likely you are to be audited. And even Willie Sutton would have appreciated the IRS’s “M.O.”:
- If you make less than $200,000, your overall audit risk is only about one in a hundred. (Of course, that average encompasses a range of possibilities. If you run a sole proprietorship in a cash-heavy business like takeout pizza, your risk may be far higher.)
- If you make over $200,000, your overall audit risk rises to about one in twenty-five. Obviously, the IRS sees more opportunity in chasing higher income earners.
- If you pull down $1 million+, your audit risk rises again to one in eight. Welcome to the 1%!
The IRS likes targeting entertainers, athletes, and other celebrities, too. Sure, it sets a high-profile example for the rest of us. But it’s also (spoiler alert) where the money is. Take Hollywood trainwreck Lindsay Lohan, for example. Google her name, and you’ll usually find it followed by “failed another breathalyzer test” or “missed her court-appointed community service.” But last month, Lohan made a different kind of headline. That’s right, the IRS filed a lien against her home seeking $93,701.57 in unpaid taxes from 2009.
Our jobs as accountants is to help you pay the minimum tax allowed by law. But we know the IRS is out to challenge us, so we don’t cut corners. We give you good, solid planning. That way, even if you do lose the “audit lottery,” you’ll feel safe knowing your savings are court-tested and IRS-approved.
EDITOR’S NOTE: Have any of you ever been audited before? Did it come out okay? 1 in 100 doesn’t seem bad at all, but I def. don’t want to find experience it, haha… though I’m pretty sure w/ all my blog stuff going on I’ll be due for one at some point over the next few years ;) Yet another reason to be friendly w/ an accountant you trust!
Barbara Richardson is a CPA with SpringWell Financial – a full-service Certified Public Accounting and personal financial consulting company dedicated to empowering individuals and small businesses to financial freedom.
PS: Some of my favorite tools:
|Personal Capital (FREE) -- If you’re looking for a robust financial tracker, Personal Capital is the way to go! They’re like Mint, but on steroids and have much better tools for investment and net worth tracking. // Full review|
|Digit (FREE) -- A super easy (and lazy!) way to save. Sign up once and automatically start saving a few dollars every few days... Been hooked since day 1 and have already banked $4,000 myself :) // Full review|
|Acorns -- Having trouble finding money to invest? Check out Acorns – they round up all your transactions to the nearest $1.00 and drops the difference into an investment portfolio for you. Easy way to start investing! // Full review|