Dodging the IRS Tax Audit

The IRS tax audit is not dead despite what you may have read in the newspapers and perhaps on this blog. While the individual tax audit rate was less than one in 119 returns at a measly .84% some groups of taxpayers got to enjoy more contact with their favorite governmental agency. These included sole proprietors where the IRS audited approximately 2.5% of schedule C businesses with gross income over $25,000. The IRS is well aware of the abuse associated with the earned income tax credit and therefore used its resources to audit 1.75% of these people. Taxpayers with income of $200,000 or greater enjoyed an audit rate of 2.61%. Millionaire reporters were the most likely to be subject to audit at 9.55%. How does one draw attention for a tax audit? Travel and entertainment, business use of a personal vehicle, hobby losses of all varieties, and of course the more recent failure to report foreign bank account investment information which has perhaps produced more additional revenue than all the rest.