IRS audits of small business tax returns are up – way up, and headed even higher. The Internal Revenue Service has said loud-and-clear that it believes roughly $100 billion of income from small business, home office and other solo-operator sources goes unreported each year.
As a result, the tax collecting agency has amped up an enforcement effort aimed squarely at a wide range of small business returns, including S-corporations, LLCs, partnerships and especially sole proprietors, who generally use a Schedule C to a personal 1040 return to report business-related income. The audit stats get ugly. Sole proprietors – the most dominant form of small biz ownership – are 10 times more likely to be audited than other business entities.
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