Under the Radar No More
The Internal Revenue Service recently announced a campaign to investigate the use of corporate jets by large businesses and wealthy individuals. Although the announcement was made on Feb. 21, 2024, the campaign is part of a larger effort by the IRS to increase its scrutiny of high-income taxpayers and large businesses to help close the tax gap, marking a significant step in IRS corporate jet audits.
Overview of IRS Corporate Jet Audits
"It's part of the larger IRS campaign," said Zeinat Zughayer, tax controversy manager at Top 100 Firm Baker Tilly. The IRS has already collected $482 million after completing audits of 1,600 wealthy individuals as part of its continuing efforts aimed at ensuring that "high-income groups aren't flying under the radar" with their tax responsibilities.
Key Focus Areas in IRS Corporate Jet Audits
The agency's examinations of corporate aircraft typically surround three issues, according to Zughayer:
- Whether the taxpayer qualified for bonus depreciation;
- Whether the taxpayer has substantiated the business deduction; and,
- Whether the taxpayer has properly imputed income and/or properly calculated the depreciation disallowance for personal use.
"The use of corporate aircrafts by large businesses and high-net-worth individuals has always been an audit risk that we identify when advising clients," Zughayer said. "We've learned that the IRS tends to focus on the classification of the flight, whether it's business or personal, and then how they're accounting for the deduction of business expenses or disallowing a portion of those expenses to account for personal usage."
Best Practices for Handling IRS Corporate Jet Audits
Zughayer advises clients who purchase corporate jets to put best practices in place right from the beginning. "A lot of our clients now purchase flight log software to help document the business purpose of the flight, who's on the flight, the destination and when they're leaving, and then also taking it a step further from past exam experience," she said.
Political Support for Increased IRS Corporate Jet Audits
Another reason the issue has become a hot topic, according to Zughayer, is that a number of progressive senators wrote to Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel praising the fact that the IRS is "increasing audits of corporate jet usage and cracking down on any executives who are illegally excluding income related to personal trips."
The Future of IRS Corporate Jet Audits
"Again, we appreciate the IRS's commitment to using new funding to make our Tax Code fairer, including the recent announcement of audits of wealthy taxpayers who claim millions in deductions for their use of corporate jets," the senators wrote. "As the agency moves forward with these audits, we urge you also to pursue rule-making to properly close the [standard industry fare level] loophole that allows ultra-wealthy taxpayers to avoid tax on personal trips."
Whether you have a corporate jet or not, if you find yourself looking at any worrisome tax matter, contact me or any member of my Tax Problem Solver team for help immediately. We'll start the ball rolling and take care of things for you. And you can rest assured you'll be in the best hands!
You can reach us by one of the contact methods below in the blue box, or email me at Larry@TaxProblemSolver.com and we can review your specific issues and solve them. You can also click here to book a free consultation.
Would You Like to Find Out What Your
Next Best Steps Should Be?
Choose one of the 3 FREE contact methods that is easiest for you.
Schedule a Call with Us
Click the calendar button below to view our appointment calendar, and choose a day & time, and we’ll call you then.
We look forward to your free consult!
Call Us Now
Click the phone button below to either "click to call" or direct dial a number to speak with us right now.
We look forward to speaking with you!
9-Secrets You Need to Know
When the IRS is after you, you need to be informed. What you say to the IRS can be used against you.
Get My 9 Secrets email series now. I'll also add you to my newsletter.
