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What are your chances of an IRS Tax Audit for 2011?
Here is the new trending that is taking place as to your risk of an IRS Tax Audit.
1. Individual Income Tax Returns: The overall audit rate of only 1.1% for all individual returns
2. If you report income on a Schedule C: ( rethink schedule C )
Individual Income Tax Returns: your IRS tax audit rate is anywhere from 2.9-4.7% vs. the overall audit rate of only 1.1% for all individual returns. Thus a Schedule C will increase your audit risk 3-4 times.
3. The Audit Rate for partnerships and S Corporations are at .4% ( less than 1 %). The message here is that you should strongly consider conducting your present Schedule C activity in either an S corporation or a partnership. Transitioning to an S or partnership form of doing business is very easy and is almost always tax free.
4. If your total income is over $1M: you have a 1 in 12 chance of being audited now, vs. a 1 in 15 chance in 2009. This is huge. The issues that seem to come up in these exams are
FACTS About IRS Tax Audits
- The Internal Revenue Service audits approximately 1.5 million tax returns a year.
- The Internal Revenue Service field agents complete more than 400,000 audits by office or business visits a year.
- The Internal Revenue Service completes over 1.1 million correspondence audits a year.
