In 2009, the Large Business and International Division (LB&I) of the Internal Revenue Service created a new Industry Group entitled the Global High – Wealth Industry Group (“GHW”) -commonly known as the IRS “Wealth Squad” which includes IRS teams of trained specialists, including forensic accountants, which coordinate the compliance review and examination of the more complex tax returns of high wealth individuals and their related entities.

These GHW examinations are thorough, invasive, and onerous, focusing on all aspects of the taxpayer’s wealth structure and engaging in hefty document and information gathering requests. It is crucial that the taxpayer have competent legal representation from the very outset for these IRS GHW audits. Our team of tax attorneys will take the necessary steps to ensure that our client is well prepared for the GHW audit by completing a high-level holistic review of our client’s assets, income, and related activities, creating organizations charts and summaries and then conducting a mock audit review to identify client vulnerabilities in advance of the examination to develop a strategic audit defense plan.

At the Tax Workout Group, our team of trained tax professionals fully understand the GHW audit program and have developed strategies to minimize risk of exposure to our clients. We employ techniques aimed at uncovering sensitive tax issues which will likely surface following an in-depth review of the taxpayer’s interests in partnerships, S-corporations, and other flow-thru entities as well as participation in private foundations, prohibited self-dealing and other related non-profit activities, compensation arrangements and misuse of expense account issues. It is important that we establish a non-tax purpose for these structures and consider potential constructive dividends and questionable debt arrangements. We examine gift, trust, and estate filings as well as foreign sourced income and assets and any form 8886 reportable transactions to gain insight into the scope of the audit through a self-examination process to identify all potential areas of concern upon which the IRS audit group may focus.

Once the taxpayer receives an appointment letter from the GHW audit unit of the LB&I Division of the IRS, it is important to be prepared for a thorough examination process which will likely include detailed Information Document Requests directed toward the taxpayer as well as administrative summonses and interviews of third parties associated with the taxpayer and related business entities, private foundations, and insiders. We will evaluate the potential assertion of privilege under IRC section 7525, as well as attorney-client and work product privileges in response to these third-party requests. In addition, we usually work with our client’s tax accountant under a Kovel arrangement to insulate sensitive communications among the taxpayer’s team and prevent unwanted disclosures when necessary.

Finally, because the burden to support the tax position rests with the taxpayer, by being thoroughly prepared and very responsive, we are often capable of defining the scope and direction of the audit. In this manner, we are best able to “head off the IRS Revenue Agent at the pass” and/or assert privileges and challenges to often burdensome or unclear requests to limit the scope of certain inquiries and steer clear of vulnerable areas of exposure.