The decision to step up audits of corporate executives came after the agency audited two-dozen companies to find out whether their executive compensation practices followed the letter of the law (See IRS Steps Up Exec Comp Audits ). After the examination, the IRS found significant problems that warranted further review, according to a Dow Jones report.
“We did a quick check on returns and filing patterns, and we were surprised at the number who were not filing tax returns,” Keith Jones, director of IRS field specialists told Dow Jones. Thus, the IRS expects to send a memo to all agents next week instructing them to inspect corporate executives’ returns at twice the current rate.
Included in the original examination was heightened scrutiny on executive benefits. Following the initial inquiry, the IRS identified eight areas that needed more oversight:
- executive stock options
- business and personal use of fringe benefits
- improper use of family limited partnerships as a way to transfer compensation to other family members
- golden parachutes
- life-insurance arrangements misused as a tax-free way to compensate executives or transfer wealth
- deferred compensation agreements
- offshore employee-leasing practices
- a $1 million deduction limit on executive compensation taken by corporations.