Who is most likely to be audited by IRS?
In 2008, the IRS audited 241,060 of the 15,398,563 tax returns filed by Schedule C filers. According to the statistics released by IRS, over 10% of sole proprietors were audited. 7.3% of C Corporations were audited. In comparison, only 0.4% of S Corporations and Partnerships were audited In 2008, almost 4% of sole proprietors earning $100,000 to $200,000 were audited. Not even corporations with assets worth between $5 million and $10 million were audited as often. IRS statistics shows that IRS believes that sole proprietors most likely underreport their income and overreport their deductions. The IRS numbers need to be taken seriously if you are a sole proprietor. This doesn’t mean that you shouldn’t take deductions you are entiled to take, but you should do it right, meaning you know the rules and have sufficient supporting documents to back up the deductions you take.
