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IRS audits are on the rise: Your chances are now double if you’re in this income range

After years of lax enforcement, the Internal Revenue Service appears to be getting more serious about tax audits for people who make six figures and higher.

IRS audits are on the rise: Your chances are now double if you’re in this income range
[Source Images: Image Source/Getty]

Uncle Sam is feeling invigorated!

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After several years of taking a relatively lax approach to auditing wealthy taxpayers, the Internal Revenue Service (IRS) has evidently turned a new leaf under the Biden administration. As such, it’s stepping up enforcement, and has doubled audit rates for income categories above $100,000 over the past seven months.

That news comes directly from an IRS statement released in late May, which details that for the 2019 tax year, audit rates have seen a significant jump, particularly for those earning more than $10 million per year. “Based on ongoing examination activity, audit rates for income categories between $500,000 and $1 million doubled to 0.6%. Audit rates for the $1 million to $5 million category more than doubled to 1.3% and taxpayers earning more than $10 million jumped four times—reaching 8%,” the statement reads.

So, in short, the more money you make, the more the IRS may be interested in auditing you—especially if you’re earning six figures. Overall, audit rates increased for every income range for returns filed in 2019, and those returns can be audited until 2023.

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Some perspective is critical, however: Though the IRS does seem to be increasing audit rates, those rates are still down significantly over the past decade or so. The IRS statement shows that between the tax years 2010 and 2017, audit rates for all income ranges fell significantly—by more than 82% for those earning between $200,000 and $500,000, and by more than 77% for the ranges between $1 million and $10 million, for example.

Further, another recent report from the U.S. Government Accountability Office shows that taxpayers with incomes of more than $200,000 saw huge drops in audit rates between 2010 and 2019. The largest decrease in audit rates, as outlined in that report, was for taxpayers earning between $200,000 and $500,000, who saw rates fall by 92%. For all taxpayers, the average audit rate decreased from 0.9% in 2010 to 0.25% in 2019—a 72% decrease.

The big question: What’s changing now?

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The main reason audit rates have fallen over the past decade is that the IRS itself is lacking in personnel—something that’s only recently being addressed. During fiscal year 2021, the IRS employed 78,661 full-time workers, which was a nearly 13% decrease from fiscal year 2012. The IRS has been “massively understaffed,” wrote Natasha Sarin, a tax policy and implementation counselor at the U.S. Treasury in a recent brief. “[The] agency’s budget is so depleted that the workforce is at 1970s’ levels, 20% of employees are eligible to retire, and hiring new workers is a monthslong process where uncertain funding means that the agency must assume risk to build its workforce, as vital funding to support them in the years ahead is far from guaranteed,” she wrote.

Again, though, that’s changing. The IRS currently has 6,500 front-line agents, and it plans to hire 10,000 new agents this year and next to try and work through the backlog of returns. It’s also looking to boost its workforce this summer, by hiring more than 4,000 contractors nationwide.

As the IRS beefs its staff back up, taxpayers can likely expect audit rates to increase. While that may leave some taxpayers sweating about a potential audit, most Americans will have little to worry about. Even as IRS Commissioner Chuck Rettig has vowed to take a “no stone unturned,” “all-hands-on-deck” approach to audits and clearing the agency’s current backlog of unprocessed returns.

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  • 12:55 pm

The bots are back! Elon Musk threatens to end his deal to buy Twitter

Lawyers for the Tesla CEO say Twitter is “transparently refusing” to comply with the merger agreement by withholding data on bot accounts.

The bots are back! Elon Musk threatens to end his deal to buy Twitter
[Source Images: Dimitrios Kambouris/Getty Images for The Met Museum/Vogue]

Twitter has refused to comply with Elon Musk’s repeated requests for the evaluation of spam and fake accounts on the platform, according to a letter from his lawyers Monday morning, leaving Musk threatening to terminate his deal to buy the social media giant.  

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Under terms of the merger agreement, Twitter is required to provide the Tesla CEO with any data he requests as it may relate to the transition of his ownership. The repeated denial of these requests since May 9, according to Musk’s lawyers, raises concern over whether the company is purposefully withholding information from him due to what access to such data would uncover.  

“This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” Mike Ringler, Musk’s attorney, wrote in a letter to Twitter’s chief legal officer, Vijaya Gadde.  

Reached for comment, a Twitter spokesperson told Fast Company that it is following the terms of the agreement and it still expects the deal to close. “Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement,” the spokesperson said. “We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”

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Last month, Musk announced that his $44 billion deal with Twitter would be put on a temporary hold, pending proof that bots and other spam or fake accounts comprise fewer than 5% of all Twitter users. Though Twitter estimated in an regulatory filing this spring that of its 229 million active users, spam accounts did indeed fall under this 5% threshold, Musk has said fake accounts could make up at least 20% of all users.  

Musk’s complaints about fake and bot accounts on the social media platform are nothing new. In a 2018 Twitter post he wrote, “Lots of fake accounts on Twitter characterized by high following/follower ration to make it seem like many real people when it isn’t. Wonder why.”  

Fake accounts are notoriously difficult to detect and remove, with many programmed to spread false information and trick followers into handing over financial information. For Musk himself, with more than 95 million followers, one estimate from SparkToro indicated that over half of his followers are fake, spam, or inactive users. 

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With the deal originally priced at $54.20 a share, Twitter shares have fallen over 3% since the release of Musk’s letter, landing at $38.92 this morning.  

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Why are so many high-income Americans living paycheck to paycheck?

“Lifestyle creep” occurs when an individual’s standard of living increases along with his or her income, but that’s not the whole picture here.

Why are so many high-income Americans living paycheck to paycheck?
[Photo: Ron Lach/Pexels]

What would you do with $250,000 per year?

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The typical American family, which earns a median household income of $67,000 per year, would likely be able to put that type of earning potential to serious use by paying down debt, padding their savings and investments, and maybe taking a vacation. But for millions of high-earning households, the answer is evidently “simply make ends meet.”

As many as 61% of U.S. consumers were living paycheck to paycheck as of April, according to a joint study from PYMNTS and LendingClub (the latest in the monthly “Paycheck-To-Paycheck” series), which surveyed more than 4,000 people in the United States in early April. That’s an increase from 52% in April 2021.

But perhaps the most surprising takeaway from the study is this: Thirty-six percent of consumers earning more than $250,000 per year live paycheck to paycheck. Further, 42% of consumers earning more than $100,000 per year are doing the same. The report does note that living paycheck to paycheck doesn’t necessarily mean that these households are struggling. It even categorizes these consumers into two categories: Those who can pay their bills easily, and those who can’t. It’s also worth taking into consideration that many people may be contributing significant amounts of money to retirement plans or other accounts before it even hits their bank accounts, making it feel or appear that they’re bringing in less than they are.

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With all of that in mind, some experts, however, aren’t shocked by those figures.

“It’s not surprising to me,” says Robert Fortune, a financial advisor at New York-based Fortune Advisory Services. “Back in the day, there was what we used to call ‘living within your means,’ and that’s gone away. If you make money nowadays, many people think that they need to show it.”

Fortune adds that social media is fueling a “keep up with the Joneses” mentality, and that the ability to spend money quickly and often mindlessly—by ordering takeout using apps like Uber Eats, or making one-click purchases on websites like Amazon—are eating up a bigger percentage of many budgets than people anticipate.

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Those types of habits don’t disappear as people make more money, either, which can lead to what’s often called “lifestyle creep”—a phenomenon that occurs when an individual’s standard of living increases along with their income. “If you have poor spending habits, making more money doesn’t solve your problems. It often exacerbates them,” Fortune says.

While lifestyle creep may account for a part of the financial crunch that high-income households find themselves in, there are many other factors to consider, too. For instance, many high-paying jobs tend to be clustered in cities with very high costs of living, such as New York City or San Francisco. In New York City, for example, median rent is nearly $3,900 per month, or $46,800 per year. Add in a few other expenses, and a $100,000 income can quickly be eaten up by everyday living expenses. Suffice to say that living “paycheck to paycheck” doesn’t always look the same from city to city, or region to region. And, obviously, inflation is playing a role in tightening the financial vises on many families, too.

Still, Fortune says that high-earners—and most anyone, in fact—should be able to relieve some financial pressure by getting back to basics. Specifically, he says that people need to take a realistic look at their finances and create a plan.

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“You need to look at what you’re earning, [consider] what your financial goals are, and create a budget. Budgeting is like a four-letter word—people think they won’t be able to have fun,” he says. “But it’s really just getting a handle on how you’re spending your money.”

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630 feet below the Earth in China, an ancient forest blooms at the bottom of a sinkhole

Scientists believe the underground world could be teeming with species unknown to humans.

630 feet below the Earth in China, an ancient forest blooms at the bottom of a sinkhole
A typical karst geological site in WuLong town, Chongqing, China. [Photo: Getty]

In May, a team of spelunkers rappelled into the dark heart of a 630-foot-deep sinkhole in China’s Guangxi region. Near the southern border, Guangxi is home to a landscape of mountainous rock, formed into towering domes, etched with ridges, and steeped in pools of jade-green water and a lush thick of trees.

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It is among China’s most beautiful terrain. It is also marred by at least 30 giant, sunken swaths of earth—tiankeng, or “heavenly pits,” in Mandarin, scattered like beads across the countryside.

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But this newly discovered sinkhole—deep enough to swallow the U.S.’s tallest national monument, the 630-foot-tall Gateway Arch in St. Louis—houses an even more majestic world. At its bottom, the expeditionists found a flourishing prehistoric forest, with 130-foot-tall trees branching skyward to a faraway circle of sunlight. Their roots dig into a tangled growth of forest floor that could bury a person up to the shoulder.

Blooming amidst the flora and fauna are ferns, wild bananas, fig fruits, and rare square-shaped bamboo shoots—one stalk with a large bite taken from it, explorers told the Guangxi Daily news.

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As described to Chinese news outlets, it sounds like a near-mythical realm—a fantasy kingdom of Narnia, or the highlands of Middle Earth—and its promise for biologists and geologists is no less thrilling. Scientists believe the forest could harbor thus unknown plant or animal species, as sinkholes can offer an oasis for botanical life. Such “ancient” or “primitive” ecosystems have never been disturbed by humans. And they are natural jewels for study, offering a glance at what our planet might’ve looked like in primeval times, devoid of humankind’s intrusion.

“I wouldn’t be surprised to know that there are species found in these caves that have never been reported or described by science until now,” Chen Lixin, who led the trek through the sinkhole’s forest, told China’s Xinhua news.

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Guangxi is one of the world’s richest treasure troves of karst topography—found mostly in China, Mexico, and Papua New Guinea—where dramatic landscapes are formed by eroding underground bedrock. In such climates, rainwater runs first through soil—becoming gradually more acidic as it saps carbon dioxide from the earth—and then flows through cracks in the bedrock, hollowing it away into sprawling webs of limestone chambers, pillars, bridges, and tunnels. If the chambers grow large enough, they collapse inward and a sinkhole is born.

According to NASA, 13% of China is karst topography, including the world’s largest sinkhole, Xiaozhai Tiankeng, at 2,172 feet deep in Chongqing. Set upon an enormous underground river, it also houses a robust forest ecosystem connected to a network of caves, much like Guangxi’s site—which is named Shenying Tiankeng, for the way its cliffside looms like a pair of soaring wings.

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Scientists now seek to illuminate its untold secrets, hidden in the tiny universes of heaven’s Earthly craters.

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How to get budding TikTok stars to hype your products, without paying influencer prices

Brands like Scrub Daddy are partnering with up-and-coming TikTok stars before they get big—and expensive.

How to get budding TikTok stars to hype your products, without paying influencer prices
[Source Photo: Artem Podrez/Pexels]

Influencers are often the gateway for companies to become TikTok-famous–but it can sometimes be challenging to find the right partners that align with your brand. Unless your company is in a well-established category on the platform like beauty, where there are thousands of creators to choose from, it can be time consuming to find collaborators.

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Big brands often rely on agencies and consultants to source and manage their partnerships with influencers to build buzz, handing off the complexities of negotiating and managing relationships with creators. For smaller brands and startups, a helpful self-serve alternative is TikTok’s Creator Marketplace, a platform where businesses can search for vetted creators based on three categories: audience, content engagement, and topic.

One big advantage of brands using the Creator Marketplace is that they can easily discover up-and-coming creators who are growing quickly on TikTok and are new to working with advertisers. It’s an arrangement that can be beneficial for both parties: An endorsement from an advertiser will likely help the creator attract other brand deals, and these early sponsorships are often much more affordable.

That’s what has worked for Scrub Daddy. The cheerful brand of sponges, which gained a following after its Shark Tank appearance in 2012, has grown its TikTok following to 1.7 million, partly by partnering with creators early in their rise to fame. “We had to find someone who was up and coming that wouldn’t break the budget because this was an experiment for spending money,” says Will Augenbraun, chief strategy officer at Scrub Daddy. “And we wanted it to be natural and not forced.”

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The right match turned out to be TikTok’s self-dubbed “queen of cleaning,” Vanesa Amaro, a housekeeper who now has more than 5.4 million followers on the platform. She’s known for her lighthearted tutorials and product recommendations for cleaning everyday items like ovens and kitchen drawers. The partnership with Scrub Daddy was her first, and she frequently featured Scrub Daddy products in her videos, often earning millions of views. The products were a natural match with her audience and content.

“I would say it has benefited me in so many different ways,” says Vanesa Amaro. “It was more of a learning experience at the beginning. So, learning how to work with companies. Scrub Daddy gave me my first intro to the actual influencer world.” Offering a monthly retainer in return for approximately three posts per month, Scrub Daddy increases this fee based on her follower growth, given the company stands to reach more people as she grows. Amaro found this arrangement more attractive and lucrative, since there’s more opportunities to grow together in the long term as well as earn recurring income compared with a typical one-off deal. 

Amaro, who says the best way to determine your prices as a creator is to compare notes with others who have similar followings, suggests those who have a million followers or more charge $10,000 per post minimum. 

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Amaro has since partnered with other brands like Clorox, Hefty, and Hoover, but because Scrub Daddy got its foot in the door first, it was able to strike an affordable deal before there was any competition, says Augenbraun. Most important, the brand was able to build a long-lasting relationship with her. She has since created a product line with Scrub Daddy, become an advisor on campaigns and product launches, and is even helping the brand build relationships with other creators. She helps Scrub Daddy find new partners to work with on TikTok and reaches out to them on behalf of the brand. Today, Scrub Daddy now has deals with about 25 influencers on TikTok.

Ready to find your own influencers? Companies can search the Creator Marketplace by an influencer’s location, gender, age, and mobile device preferences, as well as the size and location of their audience.

You can filter results by the average views a creator’s videos earn, engagement rate, and level of expertise partnering with brands. Most important, you can narrow the results by the topics influencers cover, such as sports, arts and crafts, jewelry, cosplay, or something else.

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To zero in on fast-growing creators, review creators with 10,000 to 100,000 followers, and select “emerging” under “brand experience,” as this will only showcase people who are new to brand partnerships. Alternatively, you can turn on the “only show fast growing creators” feature. 

In order to be part of the marketplace, creators must be 18 years old, either apply for approval through a self-application process or get invited, and have at least 10,000 followers. Any organization can access the marketplace with their TikTok Ads Manager account, or by registering with documentation like a tax registration certificate or license of incorporation. Also keep in mind that you don’t necessarily need to manage your partnerships with creators through the marketplace. You can also contact them directly, which some influencers say they prefer. Email addresses are often listed in their profiles.

Brian Honigman is a marketing consultant, adjunct professor, and LinkedIn Learning instructor.

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