The IRS global high wealth industry group: how the IRS targets high net worth individuals

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Alan Winston Granwell

Holland & Knight, Washington, DC



Andrea Darling de Cortes

Holland & Knight, Tampa



The United States has the most members of the top one per cent of the global wealth group: in 2019, it accounted for 40 per cent of the world's millionaires.[1] Looking forward, it is projected that in 2024, the US will continue to rank as number one in terms of ultra-high net worth individuals.[2]

In this article, we focus on the group specifically formed by the US Internal Revenue Service (IRS) to audit high net worth individuals and how global transparency has impacted its activities.


As is evident, and as the Organisation for Economic Co-operation and Development (OECD) has recognised,[3] taxpayers at the top of the wealth or income scale make a significant economic contribution to society and account for a large part of total income tax. Nonetheless, high net worth taxpayers pose significant challenges to tax administrations due to the complexity of their affairs, their revenue contribution, the opportunity for aggressive tax planning and the impact of their compliance behaviour on the integrity of the US tax system.[4] The OECD further notes that high net worth individuals are the second principal market for aggressive tax planning (in addition to large corporate taxpayers).[5] These challenges have only increased as a result of globalisation.

The Global High Wealth Industry Group

In 2009, to address past criticisms over disparities in the audit rates of low and high-income taxpayers, the then-IRS Commissioner formed a specialised, elite group of field examiners identified as the Global High Wealth Industry Group (the GHW group), situated within the Large Business and International (LB&I ) Division of the IRS.[6] This highly trained group, colloquially known to tax professionals in the US as the ‘IRS Wealth Squad’, was established to focus on the audit and collection of tax of high net wealth individuals and their complex arrangements.

An Internal Revenue Service Manual (IRM) document on the GHW group processes and procedures is informative as to the operation of the group, particularly as to how the GWH group identifies audit targets.[7] The GWH group programme goals are to ensure that the group uses its limited resources to identify and examine high wealth taxpayers with the highest compliance risk in a consistent and efficient manner.[8]

The IRM states that the GHW group ‘was formed to take a holistic approach in addressing the high wealth population; that is, to look at the complete financial picture of high wealth individuals and the enterprises they control’.[9]

When the GHW group, through its population identification, and detailed risk assessment and case building procedures (discussed below), identifies a high net worth individual – known as a ‘key case’ (ie,the primary taxpayer in an enterprise case) – the ‘enterprise case’ is established.

A GHW ‘enterprise case’ thus consists of a ‘key case’ – generally an individual income tax return and related income tax returns where the individual has a controlling interest and significant compliance risk is determined. In effect, GHW examines all of the tax returns together as one GHW case. An audit of an ‘enterprise case’ is different than the usual audit of an individual or an entity, as it focuses not only on the return of the taxpayer but also the tax returns of related entities.[10]

Population identification[11]

In terms of identifying potential targets within the high wealth taxpayer population, business and financial enterprises with significant earnings controlled by high net worth individuals (with assets or earnings in the tens of millions of dollars) are reviewed.[12] An analytical group within LB&I provides the GHW group with an initial listing of the high wealth taxpayer population and then utilises computations to determine the examination potential of the enterprises controlled by the high worth individual. These computations were developed and are used to conduct a preliminary assessment on the level of compliance risk on a filed or unified return. The returns with the highest risk indicators are further risk-assessed to potentially identify the enterprises to be selected for GHW examination

Detailed risk assessment and case building[13]

A detailed risk assessment process is then carried out, consisting of:

  • researching taxpayer forms and related data;

  • identifying specific issues;

  • observing trends; and

  • consulting with industry or other tax specialists.

Risk assessment includes preparation and review of a yK-1 analysis[14] for each taxpayer to gain an understanding of the taxpayer enterprise (Form 1040 and all related entities). Large, unusual, or questionable items (LUQs) are noted by the group during the risk assessment process for consideration by field agents for all entities in the enterprise that are determined to pose a risk of non-compliance. Related entities considered to be high risk are identified for inclusion in the case building package. Upon conducting a complete risk assessment, the group risk assessors determine whether the case will be included in inventory ready for assignment. Thereafter, personnel build ‘enterprise case’ files for delivery to the field with all related returns to be examined and other tax-relevant materials.

Additional sources[15]

In addition, the GHW group obtains potential ‘key cases’ through:

  • referrals from the field;

  • whistleblower claims; and

  • the identification of issues of significant impact to the high net worth population that result in additional screening of high net worth individuals and entities within that population.

Did the GHW Group meet expectations?

Since the formation of the GHW group, questions have arisen as to whether the GHW group has met expectations.

According to reports issued by the Treasury Inspector General of Tax Administration (TIGTA),[16] audits of taxpayers with more than $1 million in income had declined over the past ten years. Additionally, the number of high net worth non-filers had increased from approximately 7 million non-filers in 2010–2013 to over 10 million non-filers by 2016.[17] By 2018, individual non-filers were said to account for a tax loss of $37.5 billion.

IRS campaigns

In 2017, to further hone the overall effectiveness of audits, the IRS’s LB&I Division redefined its compliance approach and initiated an issue-based audit strategy to identified specific tax law issues (referred to as ‘campaigns’) that presented a high risk of non-compliance.

The goal of the IRS campaign initiative has been to improve return selection for audit, identify issues that represent a high risk of non-compliance, and make efficient and effective use of the IRS’s limited resources.Since 2017, the IRS launched a total of 68 campaigns – 57 of which remain active. A number of these campaigns focus on high net worth individuals and offshore activities.[18]

High net worth IRS audit developments in 2020

We summarise the developments in sequential order. As noted below, these activities were impacted by the Covid-19 pandemic.

On 19 February, although not an official LB&I Campaign, the IRS initiated a programme that targeted high-income non-filers. Under that programme (described in IR-2020-34 and linked to the 2019 LB&I active campaign targeting high-income non-filers), data analytics were used to identify high income non-filers (ie, taxpayers who make more than $100,000). Once a taxpayer was identified, IRS revenue agents were assigned to make unscheduled and unannounced in-person visits to inform those targeted taxpayers of their tax and reporting obligations, with the objective of ultimately bringing them into compliance. The IRS had estimated making several thousand visits throughout 2020.

On 25 March, in view of the Covid-19 pandemic, the IRS introduced the People’s First Initiative and announced a sweeping series of steps to help taxpayers by offering temporary relief on a variety of issues. These ranged from easing payment guidelines to postponing compliance actions from 1 April 2020 to 15 July 2020. Public data is not available as to the number of in-person visits that took place prior to the People’s First Initiative.

On 29 May, TIGTA issued a report on high-income non-filers owing $45.7 billion in taxes for tax years 2014–2016. The 100 highest-earning non-filers in the study avoided paying $9.9 billion in taxes.[19]

On 18 June, Douglas O’Donnell, Commissioner of the IRS LB&I Division, announced that the GHW group would conduct audits of several hundred returns of high net worth individuals and private foundations between 15 July and 30 September. The May TIGTA report may have been the impetus for this new IRS compliance campaign targeting high net worth individuals.

The GHW group will use a holistic approach to examine all areas of a taxpayer’s wealth, to include a review of foreign assets and related entities. Rather than focusing on merely a single return, the IRS will examine the complete financial picture of high net worth individuals and their controlled enterprises.[20]

It is significant that examinations are restricted solely to the LB&I division but include other IRS units involved in examination, thus providing for a more collaborative risk assessment of global high wealth taxpayers. For example, if applicable to a case, the IRS unit that deals with private foundations and stock ownership plans will examine that aspect, thereby making the IRS examination more complex as it would involve not only the GHW group but the private foundation unit. In connection with these examinations, affected taxpayers should expect that IRS examiners will issue detailed, extensive and lengthy information document requests.[21]

Finally, in regard to foreign assets/activities of high net worth individuals, it should be noted that the GHW group now (as compared to 2009) has access to unprecedented amounts of offshore information (as further discussed in the Appendix) and has new and improved data analytics tools to analyse this information. Thus, targeted high net worth taxpayers with offshore investments/activities should anticipate a comprehensive multi-year examination of their assets, including such items as:

  • foreign financial accounts;

  • foreign retirement accounts;

  • foreign trusts;

  • interests in controlled entities, US or foreign (partnerships, corporations, and foundations); and

  • gifts and bequests either made or received.


In view of the dramatic increase in revenue shortfalls and governmental deficits,[22] governments are anticipated to aggressively audit high net worth individuals to recoup lost revenues.

The takeaway going forward is that high net worth individuals need to be scrupulous in their tax compliance. If not, they may become a target of the GHW group, which will examine the complete financial picture of the high wealth individual and the enterprises they control.

Appendix: IRS access to information

We summarise how governmental access to offshore information has changed between the formation of the GHW group and now.

When the GHW group was formed, bank secrecy and financial privacy was the norm. Tax transparency is now ubiquitous. Today, there is an ever-increasing focus on automatic exchange of information, disclosure, reporting, investigations and international cooperation.[23]

The evolution from exchange of information on request to the automatic exchange of information (AEOI) as the new global standard for the exchange of information was achieved through the 2010 enactment by the US Congress of the Foreign Account Tax Compliance Act (FATCA) in 2010, which requires foreign financial institutions (and certain other non-financial foreign entities with US owners) to provide certain US taxpayer information to the IRS or be subject to a 30 per cent withholding tax on certain US source payments, and the subsequent bilateral adoption of intergovernmental agreements (IGAs) to implement FATCA by over 100 countries. Thereafter, the development in 2013/2014, and the adoption in 2016 of the OECD Common Reporting Standard (CRS) confirmed the AEOI as the new global standard for the exchange of information.

The US has four principal vehicles for the exchange of information:[24]

  • bilateral income, estate and gift tax treaties;

  • the OECD Convention on Mutual Administrative Assistance in Tax Matters (OECD Mutual Assistance Treaty);

  • tax information and exchange agreements (TIEAs); and

  • FATCA.

The US also obtains information through:

  • mutual legal assistance treaties (MLATs);

  • inter-governmental cooperation;

  • voluntary disclosure programmes;[25]

  • whistleblowers;

  • journalists and reporters;

  • stolen or leaked data;

  • cooperators;

  • the Swiss Bank Program;[26] and

  • documents provided by financial intermediaries and others facing investigations or prosecution, particularly ‘leaver’ lists.

US governmental authorities are ‘following the money’ and investigating all types of offshore facilitators, including:

  • financial institutions;

  • asset managers;

  • corporate service providers;

  • financial advisers;

  • insurance companies; and

  • other persons and entities that facilitate offshore tax evasion.

In addition, in the area of international cooperation, the IRS has been an active participant in a number of fora to include, for example, the OECD Forum on Tax Administration, which brings together commissioners from advanced and emerging tax administrations from across the globe, including all OECD and G20 members. The US is a member of the Joint Chiefs of Global Tax Administration, known as the J5, which targets international tax evasion.[27]

The IRS (the civil and the criminal investigation division), together with the Department of Justice, utilise the information received to ‘follow the money’ in efforts to uncover tax avoidance and tax evasion and recover tax dues.


[1]Credit Suisse, Global Wealth Report 2019, 44. Important drivers were low interest rates and the large tax reduction enabled by the Tax Cuts and Jobs Act.

[2]Knight Frank, 2020 Wealth Report. Interestingly, the report projects that, between 2014 and 2024, there will be triple digit growth in ultra-high net worth individuals in China and India.

[3]OECD Publishing, 2008, The OECD's Project on High Net Worth Individuals, 4

[4]OECD Publishing, 2009), ‘Executive summary’, Engaging with High Net Worth Individuals on Tax Compliance, 7.


[6]LB&I serves corporations, Subchapter S corporations, and partnerships with assets greater than $10 million. These businesses typically employ large numbers of employees, deal with complicated issues involving tax law and accounting principles, and conduct business in an expanding global environment.

[7]See IRM (Internal Revenue Manual), 2019, 4.52.1, ‘Global High Wealth Program Processes and Procedures’.


[9]IRM. A controlling interest can include significant ownership of, or significant influence over, an entity or multiple entities within the enterprise, to include interests in partnerships, trusts, Subchapter ‘S’ corporations, ‘C’ corporations, private foundations, gifts, and the like. GHW group personnel work with personnel from other business operating divisions within the IRS to address noncompliance across the entire enterprise. 

[10]IRM; terms and acronyms are defined in IRM


[12]Although the IRS has not addressed who is a ‘high net worth’ individual, the GHW focuses on tax returns with more than $100,000 of tax due, as well as on taxpayers with related entities.


[14]This is an interactive link analysis tool developed by IRS Research to discover and explore tax entities and their relationships.

[15]IRM (2013).

[16]TIGTA was established in 1998 to provide independent oversight of IRS activities.

[17]Further, in its early years, it was reported that the GHW program completed audits on 36 ‘super high-income returns’, a number that may have represented only 12 or 18 individuals reporting at least $1 million in income, based on a 2012 report from the Transactional Records Access Clearinghouse at Syracuse University. The same article reported that, in 2015, TIGTA found the IRS had taken steps to improve its audit coverage of high-income taxpayers although the LB&I division had not yet established the GHW program ‘as a standalone industry capable of conducting all of its own examinations’. See Natalie Olivo, 4 Considerations As The IRS Begins High-Wealth Audits, Law 360, Tax Authority (28 July 2020).

[18]These include, for example, the High Income Non-Filer Campaign, the Swiss Bank Program Campaign, the Expatriation of Individuals Campaign, the Offshore Private Banking Campaign and the Post Offshore Voluntary Disclosure Program Campaign.

[19]Law 360, Tax Authority, Dylan Moroses, Not Pursuing High-Income Nonfilers Costs $46B, TIGTA Says (1 June 2020).

[20]In his June announcement, Mr. O'Donnell stated:

‘This campaign is very different from campaigns in the past where we focus on a specific transaction or issue or line item. This is looking at the entirety of a return, giving examiners the authority to look beyond any specific issue. … We’re asking our employees to go into returns and understand how taxpayers have implemented the TCJA. What did they actually do? Is there something about the returns that lend themselves to a greater likelihood to have one type of transaction versus another transaction? Is there something specific we can say about entities that are smaller, that have fewer controls, that are closely held? Which controls are different? There are a lot of opportunities to learn here.’

[21]An IRS information document request (IDR) is a formal request to gather information and facts. If a taxpayer does not respond or if the response is incomplete, the IRS can compel disclosure through its standard enforcement procedure, ending up in a summons enforcement.

[22]The US budget deficit reached $3 trillion in the 12 months through June as stimulus spending soared and tax revenues plunged, resulting in the federal government being on pace to register the largest annual deficit as a share of the economy since World War II. One report has projected a global $10 trillion deficit in 2020, and a cumulate shortfall of up to $30 trillion in 2023. Rima Assi, Mael de Calan, Akash Kaul and Aurelien Vincent, Closing the $30 trillion gap: Acting now to manage fiscal deficits during and beyond the COVID-19 crisis.

[23]Tax transparency became prevalent because of (1) an increasingly borderless world; (2) exponential growth in international transactions; (3) increased complexity of transactions and tax laws; (4) international tax evasion scandals that highlighted and resulted in international investigations and improved international compliance; (5) the 2007-2008 global economic crisis, and (6) global efforts by countries to collect taxes legally due by their residents (and, in the case of the United States, its citizens wherever resident). These factors, which coalesced in the past decade, led to the current status of tax transparency.

[24]There are three main forms of exchange of information: (1) automatic, (2) specific, information upon request, and (3) spontaneous.

[25]In addition, the IRS has instituted several voluntary compliance initiatives to remediate unintentional and wilful US tax non-compliance in connection with offshore financial assets and activities. These programs have garnered a tremendous amount of information and significant revenue pick-ups in the form of taxes, interest and penalties.

[26]The US Department of Justice (DoJ) has investigated and prosecuted foreign financial institutions and facilitators that have assisted US taxpayers to evade US tax and reporting obligation. Through the Swiss Bank Program, the DoJ and the government of Switzerland provided a path for Swiss banks to resolve criminal liabilities in the US, and the DoJ received a treasure trove of financial information that it never would have received but for the Program, in addition to cooperation by the Swiss banks and a significant amount of penalties. The DoJ now is using the information it received, particularly with respect to ‘leavers’(US account holders who transferred their Swiss accounts to other offshore banks) to ‘follow the money’in its continuing investigations and prosecutions.

[27]In illustration, on 23 January 23 2020, the IRS in IR-2020-18 announced the first major operational activity of the J5 (composed of the UK, the US, Canada, Australia and the Netherlands), to tackle international tax evasion through a globally coordinated investigation of a financial institution located in Central America, whose products and services are believed to be facilitating money laundering and tax evasion for customers around the globe. On 13 July 2020, the IRS issued an announcement (IR-2020-151) entitled ‘J5 reflects on two-years pursuing global tax cheats’ that catalogues the results of the international cooperation among the parties to the J5 in targeting tax evasion.

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