In 2009 the Internal Revenue Service created an elite unit of auditors, to go after the Top 0.5% of taxpayers. It was believed that these people under pay the government $50 Billion a year, and the government wants the cash.
In what was proclaimed to be “a game-changing strategy”. This strategy seemingly is a complete failure. I was reading about one recreated case where the IRS started an audit in 2012 claiming the taxpayer owed $1.2 Billion in unpaid tax. But what was described as “seven years of grinding bureaucratic combat” the IRS abandoned the campaign. The IRS was willing to settle for a significantly smaller amount.
The taxpayers in this category hire nothing but the best accountants and attorneys; the IRS is not equipped to battle in this arena. Once an IRS auditor gets to the level to be able to truly assist the Service they switch teams for bags and bags of cash. So the IRS is outgunned and outspent.
Especially when the taxpayers teams are creating an ultra-complex and sophisticated transaction, they are creating their arguments to the IRS knowing that is may well be challenged. Then they typically can challenge every step of the IRS in court to delay the process.
It is a no win scenario for the IRS.