From CFO Magazine:

In April, the chairman of the House Small Business Committee accuse the IRS of unfairly going after small businesses with audits and complex rules. In 2005, the number of IRS audits of small companies increased in all categories.

However, IRS commissioner Mark Everson disputed the claim. He says large companies are far more likely to get audited than small companies. In 2005, the IRS audited 44% of the largest companies.

What is fueling the audits of small businesses? A study in 2001 estimated a tax gap of $300 million between what taxpayers should be paying and the actual tax they pay. It is possilbe that the IRS is targeting smaller companies based upon these numbers. I also suggest that the IRS might target these small business owners because of their lack of sophistication and therefore the ease of creating uncontested audit findings.

Tags: Small Business, IRS, audits, tax gap