

Audit Risk

Audit Risk

Audit Risk May Depend On Where You Live

Taxpayers and preparers, worried that their returns may trigger an audit, should take special care if the return is for a small business owner in one of the wealthier suburbs of Los Angeles.  Or, for that matter, one who lives in San Francisco, Houston, Atlanta, or the District of Columbia.




The study focused on small-business owners — sole proprietorships, to be specific — because they have more opportunity than the typical individual to cheat on their taxes. While most individuals get paid in wages that are reported to the IRS, many small businesses deal in cash.

The IRS only audits about one percent of tax returns each year, so the agency tries to pick returns that are most likely to yield additional tax money.

The IRS will not say much about how agents choose their targets. But the agency is running every tax return through a confidential computer program to determine the chances of collecting more money from an audit.  Each tax return is assigned a score. The higher your score, the more likely you are to get audited because, according to the IRS, the more likely you are cheating on your taxes.


How do you get high score? The IRS won’t say, but people who take unusually large deductions for their income get a high score. Also, business owners who claim unusually large expenses for the size and type of their business get a high score.

Source:  IRS National Taxpayer Advocate

by Dave McClure, Industry Writer

admin taxing_subjects


comments powered by Disqus