The IRS just published their IRS Enforcement and Service Results for their fiscal year 2009. Based upon this new data, the higher your income, the more likely that you’ll receive a letter from the IRS asking for additional information or tax payments. A correspondence audit of this kind is often triggered when you forget to report all of your 1099 payments, including “freelance” payments that were reported to you on a 1099-MISC.
The statistics released by the IRS show:
- Individuals with income over $200,000 had an audit rate of 2.89%
- Individuals with income under $200,000 had an audit rate of 0.96%
For businesses the results were:
- S-Corporations had an audit risk of 0.40%
- Partnerships had an audit risk of 0.38%
- Sole Proprietorships were not broken out from individual results
For upcoming audits, the IRS has already announced that Sub-S Corporations that are not paying shareholder/employees “reasonable compensation” will be at the top of their audit lists.
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.