Obama Administration - IRS Audit Department

Red flags for IRS audits: . . . the IRS still operates by the same basic principle: The more money you make, the more likely it will be that the IRS will want to do an in-depth study of your tax return. If your income is $100,000 or more, there is a 2 percent chance you’ll be audited. But one out of 16 people with an income of $1 million or more gets audited, . . . The IRS is also targeting “cash businesses.” For example, Knowles said, cash businesses are self-employed landscapers and house painters that often are paid by cash or check, where it is tougher to determine whether all income is reported. Also under more-intense scrutiny are “hobby losses.”

IRS Will Intensify Small-Business Audits: The Senate just passed an $800-billion-plus stimulus bill that, according to one analysis, directs a mere $6 billion to help small businesses (which create three-quarters of the jobs in the U.S.). That’s the bad news. Here’s the worse news: the IRS will decrease the number of corporate audits it performs and instead audit more small businesses. Thanks, Washington. Don’t forget to kick the dog on your way out.

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