Recently, I read an newsletter by CPA and tax strategist Dianne Kennedy. She operates a website called Taxloopholes.com and produces an interesting weekly newsletter full of tips.
In this week’s newsletter, she listed what the Top 10 Locations for Audits were — i.e, you’re more likely to get an audit if you live here. She listed:
- Los Angeles
- North Central District (ND, SD, MN)
- Southern California
- Northern California
- Central California
- Southwest (AZ, NV, NM)
- South Florida
Kennedy goes on to say that how much you make is also a factor. While most people would think those who get audited make more money, its actually people who make LESS money who are audited more. In fact, the most likely return to be audited is a return that includes a business making less than $25,000 per year. If you have a business, you are much more likely to be audited if you operate through a Sole Proprietorship (Schedule C). In fact, you’re ten times more likely to be audited as a Sole Proprietorship than if you’re run your business through an S Corporation or a C Corporation. Why? Because most Sole Proprietorships don’t have great record-keeping systems and the IRS knows that.