IRS Audits Greater in Five Major U.S. Cities

I wrote a post for the Tax Matters blog post about a recent report that revealed higher IRS audit rates in five major metropolitan areas. The culprits: small businesses attempting to tax dodge. An article by the Los Angeles Times titled “Los Angeles, San Francisco top cities for tax dodgers, study says” cites a new study from the National Taxpayer Advocate that analyzed IRS data of five metropolitan areas: San Francisco, Los Angeles, Atlanta, Houston and the District of Columbia (D.C.). Here are some of the highlights of that article:

  • The study focused on small business owners who have more opportunities to on their taxes than individuals taxpayers do.
  • Communities near the five metropolitan areas such as Newport Beach and Beverly Hills were cited as an example of cities that are potential havens for small business tax cheats.
  • The biggest tax dodgers, according to the report are owners of construction firm and real estate rental companies.

The article also provided information on recent audit rates:

  • The IRS audits 12.5% of those earning $1 million in 2011 – up from 8% in 2010.
  • About 4% of those earning $200,000 or more are audited- up from 3% in 2011.
  • Businesses with $250 million in assets have a 27.6% audit rate compared with a 1% audit rate for firms with less than $10 million in assets.

Narrowing financial gaps is a government priority, so it’s no coincidence that small business is being targeted for audits. The reason? Small business is the largest contributor to the annual tax gap; the amount of taxes owed but not collected (currently around $450 billion). Collection efforts by the IRS have been focused on those individuals and businesses where it thinks it has the best chance of yielding additional tax dollars.

As a result, legitimate small business taxpayers could be IRS tax audit targets. If you are an individual or small business owner who has concerns about being audited, you will want to consider your options for audit prevention and protection. One such option could be to purchase a pre-paid Tax Audit Defense membership plan for just $9.99 a month that puts audit audits on your side.

An audit is a paper blizzard, so these certified audit specialists handle all the bureaucracy; from the IRS paperwork to speaking with the IRS on your behalf. Any audit notification you receive, gets forwarded to the audit defense team and they handle the rest. These tax experts have experience handling complicated tax issues from beginning to end and will work hard to resolve yours for good.

More Tax Help, IRS News and Tax Relief Tips:

  1. Potential Tax Problems for New E-Commerce Rules
  2. Michael Rozbruch Interviewed in Opportunist Magazine
  3. TaxMan on Big Biz Show-Avoid Business Audits
  4. Tax Expert-Hiring a Tax Professional on Fox News
  5. Back Tax Help-How Long to Keep IRS Records

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