IRS Turns Up Heat On US Executives

by Leroy Baker, Tax-News.com, New York

04 March 2005

In an attempt to put a brake on what is seen by the Internal Revenue Service as a growing incidence of tax avoidance by America’s most wealthy, the agency has begun to regularly examine the tax returns of highly paid executives and entrepreneurs, it has been reported.

According to the Wall Street Journal, the tactic is part of a broader strategy of scrutinising the tax affairs of top company executives, including those who run charities and other non-profit organisations. This comes in the wake of the highly-publicised crimes perpetrated by high-ranking figures at the now-defunct energy firm Enron.

In particular, the IRS is interested in executive compensation schemes such as stock options, deferred compensation, golden parachutes and other fringe benefits. Since 1993, the agency has investigated compensation practices used at more than twenty firms.

IRS Commissioner, Mark Everson, told the Journal that: "We're moving toward a position where we routinely look at compensation of executives when we conduct our audits of corporations.”

He added that investigators will routinely “pull the returns of key executives” to establish whether income has been recorded appropriately.

Evidence of the agency’s more proactive stance in stamping out tax avoidance by the wealthy came with Monday’s announcement by the Justice Department of the arrest of telecoms entrepreneur Walter Anderson, who is alleged to have avoided over $200 million in income tax over several years.

Recommended