Fox: The IRS is “finding a new way to squeeze the wealthy” and “target the rich”

Fox Nation: “IRS Target: Job Providers.” The Fox News website The Fox Nation linked to an article about the IRS' Global High Wealth operating unit under the headline, "IRS Target: Job Providers"

Kelly: “The IRS is announcing a new plan specifically designed to target the rich.” On Fox News' America Live, host Megyn Kelly stated: “The IRS is announcing a new plan specifically designed to target the rich. Critics are now asking: Are those the same rich who create the jobs in this country?” Kelly interviewed Rep. Steve King (R-IA), who stated that “you can almost hear the bitterness, Megyn, in Doug Shulman's voice when he announces this” and that Shulman has spoken with “a tone of animosity towards the rich.” King later said, “This is an anti-capitalism - not just an anti-corporation - administration. And I fear for my country if we can't stand on the principle of free enterprise.” [America Live, 4/7/10]

Kilmeade: IRS “is finding a new way to squeeze the wealthy.” On Fox & Friends, co-host Brian Kilmeade introduced a segment on the Global High Wealth unit by saying that the IRS “is finding a new way to squeeze the wealthy.” Fox Business host Stuart Varney stated:

This is the IRS chasing wealthy Americans who may have money overseas. It all comes from that case involving the secret Swiss bank accounts. Twenty thousand Americans have the secret Swiss bank accounts, nothing illegal about that. But were they declaring the income from those accounts for taxation in America? Answer, probably not. So the IRS, desperate for money, is going after them. That's what it's about. [Fox & Friends, 4/7/10]

IRS commissioner: Unit is part of IRS' efforts to “combat offshore tax evasion.”

Shulman: Unit will examine “complex financial arrangements.” In an April 5 speech at the National Press Club, Shulman said that the Global High Wealth operating unit is part of the IRS' efforts to “combat offshore tax evasion.” Shulman also discussed the unit in an October 26, 2009, speech:

The last topic I want to discuss with you is our recent formation of a Global High Wealth Industry group housed in our Large and Mid-Size Business operating division.

While we are in the early stages of this work, this new unit will centralize and their related entities -- which can often have an international component. Tax agencies around the world, including those in Japan, Germany, the UK, Canada and Australia, have also formed high wealth groups.

Now, high wealth individuals are not your typical Form 1040 filers with a W-2, some 1099 income, and maybe a Schedule C enclosed with their return. And you cannot assess compliance among the nation's wealthiest individuals by looking only at their 1040s. Their tax picture is much more complicated than this.

For a variety of reasons -- including valid business reasons -- many high wealth individuals make use of sophisticated financial, business, and investment arrangements with complicated legal structures and tax consequences. Many of these arrangements are entirely above board. Others mask aggressive tax strategies.

And let me give you a flavor of these complex financial arrangements. They may include trusts, real estate investments, royalty and licensing agreements, revenue-based or equity-sharing arrangements, private foundations, privately-held companies, and partnerships and other flow-through entities that require looking at the entire, and often huge, spectrum of transactions and entities. A single high wealth individual may have actual or beneficial ownership of numerous related entities, sometimes alone and sometimes along with other family members or business associates.

And there are other tax considerations regarding high wealth individuals, including international sourcing of income and tax residency, and offshore structures and bank accounts, to name just a few.

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So here's our game plan. Going forward, we will take a unified look at the entire web of business entities controlled by a high wealth individual, which will enable us to better assess the risk such arrangements pose to tax compliance and the integrity of our tax system. Our goal is to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise. We cannot do this by continuing to approach each tax return in the enterprise as a single and separate entity. We must understand and analyze the entire picture.

We have begun hiring some agents and specialists, such as flow-through specialists and international examiners, who will begin conducting examinations of high wealth individuals and their related enterprises.

Among our first steps will be a small number of examinations of these high wealth individuals that will use this integrated, or enterprise, approach. What we learn from these initial enterprise examinations will help us define the scope of our future work and build compliance tools going forward.

Over time we will grow the new unit by adding examination agents and individuals with specialized skills and expertise, such as economists to identify economic trends, appraisal experts to advise on valuation issues, and technical advisors to provide industry or specialized tax expertise. We will also build new risk assessment techniques to identify high-income and high-wealth individuals and their related enterprises that should be reviewed holistically.