(Bloomberg News) The Internal Revenue Service audited 18.4% of taxpayers reporting income above $10 million last year, up from 10.6% the previous year.

Audit rates increased in 2010 for all income groups, except for people with no adjusted gross income, according to data released today in Washington for the fiscal year that ended September 30.

Highest earners had the sharpest increases in audit rates. The IRS audited 11.6% of taxpayers reporting adjusted gross income between $5 million and $10 million, up from 7.5% the year before. Taxpayers making between $75,000 and $100,000 faced the least chance of an audit, with a 0.64% rate.

Through its voluntary offshore disclosure programs and court cases involving Swiss banks, the IRS has gotten a better understanding of how wealthy people in non-corporate businesses manage their assets, said George Clarke, an attorney at Miller & Chevalier Chartered in Washington.

"They learn things and then they roll those things out across the board," he said.

The overall audit rate for income tax returns was 1.11%, up from 1% the year before. The IRS had previously reported some of this data without the breakdowns at the top of the income scale. For people reporting income of more than $1 million for calendar 2009, there were 388,763 returns and 32,494 audits, for a rate of 8.4%.

Concerted Effort

The increase in audits of people making more than $10 million is part of a concerted IRS effort to focus on the business dealings of the wealthiest individuals.

"Our goal is to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise," IRS commissioner Douglas Shulman said in October 2009 upon discussing the formation of a group within the agency focused on "global high-wealth" individuals.

"We cannot do this by continuing to approach each tax return in the enterprise as a single and separate entity," he said. "We must understand and analyze the entire picture."

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