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IRS Audits Estate Trust Gift Tax Returns A.M. Publishing Trust institutions trust companies banks Bernard Garbo IRS Audit Focus Remains on Estate, Trust, and Gift Tax Returns

(May 22, 2013 --Chicago, IL) -- Additional taxes owed following IRS audits in 2012 of trust, estate, and gift tax (TEG) returns fell by nearly 20 percent, to $1.5 billion. The dollar decline masks both an increase in the number of audits and an increase in the cost of errors found.

In 2012, audits of estate tax returns remained one of the most productive areas within the IRS, generating more than $3,600 per hour per IRS attorney. While the IRS found fewer errors than in prior years on estate (form 706), as well as gift tax returns (form 709), those errors cost significantly more.

While estate tax returns account for less than 1 percent of all TEG returns, audits of these returns generated 75 percent of the additional TEG taxes owed. Large estates, those valued at more than $10 million are paying an ever-increasing proportion of those additional taxes.

Chances of being audited vary greatly based on the type of return. Audit rates have increased significantly since 2007, except for 1041 trust tax returns.

Once audited, there is a very high chance the IRS will find a mistake, regardless of whether the audit is a field or a letter audit.

A trust income tax return subject to a field audit stands a better than 93 percent chance of owing additional taxes; 78 percent of audited estate returns owe additional taxes. . . . 62 percent of letter audits result in additional taxes

Average additional taxes owed range from a low of $5,600 for a letter audit of a 1041 trust return to a high of $820,000 for a large estate return.

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