Q: Am I Prime IRS Target?
Answer: Based on IRS statistic information in the past years, IRS audit rates vary significantly among taxpayers.
1.Where you live; those state are Alaska, California and Colorado.
2.Making too much money: If your income < $200,000, 2013’s Audit Rate is 0.88%; If your income >= $200,000, Audit Rate is 3.26%. Or business with assets < $10 million, audit rate is 0.95%; If business with assets > $10 million, audit rate is 15.84%.
3.How you organize your business: Sole proprietors get higher DIF score than business that are incorporated or owned by partnerships or LLC. S Corporation or Partnership’s audit rate is 0.42%. Form a Business Entity: However, you must balance this against the time and expense involved in forming a corporation. Forming a corporation (LLC) has more complex tax returns. Moreover, in some state, such as California need to pay State minimum tax yearly.
4.The nature of your business: such as running a small business deal with large amounts of cash. Especially business owners in cash intensive business – such as taxis, car washes, hair salons, restaurants and the like kinds. Comparing to the S corporations, Partnerships, and Limited Liability companies