The IRS Audit Principle

Next to a really bad health diagnosis, the thing mostmaking more than a million a year, however, has over
people fear is an IRS audit. The idea of sitting face toa six percent chance of being audited and so on.
face with an agent who is going through your recordsThere is, of course, an exception to this audit rule. In
with a fine tooth comb is enough to make even thefact, there are many but let's take a focus on a key
manliest man shiver. The key to defeating this fear isone. If you own a business that handles lots of cash,
knowledge.the IRS assumes you will be mighty tempted to under
The first thing to understand is the IRS has learnedreport what you take in. The IRS does not like that. As
where it can find the most moo per cow if you will.a result, the audit rates for cash business owners are
We are, of course, the cows. Instead of spending tonsgoing to be much higher and can be in the teens in
of man hours and money going after a person whocertain areas. Even if you are not audited, the IRS may
makes $25,000 a year, the agency has come tomonitor resource usage to keep an eye on you. For
realize it can get far more money from people makinginstance, the IRS automatically looks at water usage
$250,000 a year or more.for laundry mats to determine revenue ranges.
This is known as the IRS audit principle. The more youSo, does this mean you are off the hook if you make
make, the more likely it is you will get audited. Theless than $100,000 a year? While your chances of
current rate for people making less than $100,000 isbeing audited are greatly reduced, there is always a
roughly one percent, but most of these are simplychance you could be that lucky person who gets
notices in the mail adjusting the figures you reported. Ifcalled in. As a result, you want to keep organized tax
you make more than $100,000, your chance of beingrecords so that you can avoid problems.
audited "jumps" to a whopping 2 percent. A person