IRS Ups Audits on Self-Employed Americans
Being your own boss means contributing to the some $150 billion that independents will pay this year in income tax.
Working hard to grow your consulting business (whatever it is - design, law, accounting etc) used to mean you probably weren't going to be audited. In fact, it used to be that small fries generally escaped the perusal of the Internal Revenue Service. But no more. According to a recent report from ABC News, the IRS has increased its inquiries into people making less than $200,000 a year and out on their own. Ninety percent of the 1.4 million IRS audits conducted in 2009 involved persons pulling in less than that amount. Meanwhile, there were only 28,349 examinations of individuals who earned more than $1 million.
The fact that self-employed people catch a lot of scrutiny is no surprise: According to the IRS, the bulk of the agency's audit resources are allocated to its Small Business/Self Employment division, one of four divisions created following the IRS Restructuring and Reform Act of 1998.