How Likely Are You To Be Audited?

Statistics for Individuals

Unfortunately, the IRS increased its rate of auditing individuals in 2003 when compared to 2002. The increase was approximately 14%, but still constituted only 6.5 audits for every 1,000 taxpayers. Put another way, the risk of being audited on your personal return is less than 1 in 100.

In regard to the above numbers, it is important to note that the IRS pursued a large number of "correspondence audits" instead of face?to?face meetings. As the name suggests, these audits consists of correspondence being sent from the IRS to a taxpayer regarding a contested issue. The taxpayer can respond to the audit or pay the accessed amount depending upon the request of the IRS.

Favorable Audit News For Businesses

The audit rate for businesses is much lower than those for individuals. In 2002, the IRS audited roughly 2.2 out of every 1,000 businesses. In 2003, this rate dropped slightly to 2.1 out of every 1,000 businesses.

The IRS has attributed the decline in business audits to the "explosive growth" in tax shelters, which requires the Agency to pursue more expensive and time consuming audits due to the complexities involved in the plans. The Agency reported pursuing more than 2,200 such shelters in 2003, which the audits taking an average of 7 1/2 months longer than normal corporate audits.

Audit Risk

Whether you are a business or individual taxpayer, your risk of being audited is very low. The nominal risk, however, is not a license to pursue frivolous deductible claims on your returns. As long as you stick to valid deductions, you should be able to sleep without much concern.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

In The News:

The Big Problem With Wealth Taxes  The New York Times
How FedEx Cut Its Tax Bill to $0  The New York Times
Indian govt must end triple taxation  The Financial Express

Tax Strategy - Let Washington Pay for Your Corvette, Porsche, or Air Plane

Deducting Your Auto ExpensesAuto deductions are a very complex topic.... Read More

Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Someone once remarked, "Next to being shot at and missed,... Read More

About Income Taxes; Tidbits

1812The first attempt to impose an income tax on America... Read More

Tax Trap #2 -- Double Taxation: Isnt Once Enough?

Have you been thinking about incorporating your small business or... Read More

Get Uncle Sam To Pay $36,000 For Your Childs Education!

Let's assume that you would like to begin saving for... Read More

How To Get An Instant Pay Raise

As a gentleman was leaving my class recently, he wanted... Read More

Employment Taxes ? Depositing With The IRS

If your business has employees, you must pay employment taxes.... Read More

Euro Tax Haven Threat

Media reporting of a new EU savings tax directive has... Read More

IRS Obtains More Than 100 Injunctions Against Tax Scheme Promoters

The IRS has obtained civil injunctions against more than 100... Read More

Tax Trap #5 -- Ignoring The IRS (and the 5 best ways to contact them!)

We all love to criticize the IRS, don't we? And... Read More

The Implications of Income Tax Charge on Estate Planning

OverviewIn the Pre-Budget Report of December 2003 the Chancellor Gordon... Read More

Tax Deductions - Mr. C.P.A. Can I Deduct a Pizza? You Too Can Deduct Your Fun By Using Tax Tips

Recently, I stumbled across a concept that could change your... Read More

Small Businesses: Company Car Vs. Personal Mileage Reimbursement In Hurricane Katrinas Wake

With gas prices at an all time high before Hurricane... Read More

What the Tax Software Companies Dont Want You to Know

Haven't done your taxes yet? No problem. Now there is... Read More

Seven Key Tax Deductions for the Self Employed

As a sole proprietor, it's wise to familiarize yourself with... Read More

What to Do If You Can?t Pay Your Taxes

The end of tax filing extensions is quickly approaching. What... Read More

Donating Cars To Charity - New Tax Rules

On June 3, 2005, the IRS released guidance on charitable... Read More

1031 Exchange Rules and Requirements

Following is a reproduction of the IRS's rules and requirements... Read More

Military Reservists, Enlistees May Get Deferral of Back Taxes

Reservists called to active duty and enlistees in the armed... Read More

Tax Trap #4 -- The Quagmire of Depreciation

If you are a Small Business Owner or Self-Employed Person,... Read More

Are You An Innocent Victim of These Popular Myths?

Misconceptions, misinterpretations and just plain "untruths" are floating about income... Read More

Identity Theft ? Impacting Your Taxes?

If your identity is stolen, your finances can quickly become... Read More

History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those... Read More

Paying Workers ? What Can You Write-Off?

As your business grows, you are going to need help.... Read More

Another Tax Loophole

Just image, you are a small manufacturing company, business has... Read More