(Businessweek) — There’s nothing that strikes fear into the heart of a small business owner like getting an audit notice. The chance of being audited in any given year is small: About 1 percent of 2008 taxable returns were audited, according to the latest available IRS statistics. But self-employed individuals and small business owners are more likely to be audited than employed persons, particularly if they report adjusted gross income of more than $100,000.Scott Berger, a CPA and tax principal withKaufman Rossin in Boca Raton, Fla., spoke recently to Smart Answers columnist Karen E. Klein about “hot spots” for IRS audits, what to do during an audit, and how to avoid audits in the first place….
What triggers an audit? The IRS will tell you it’s random. Their computers are programmed to look closely at differential scores, but how those are defined is closely guarded. There are all sorts of stories as to what generates an audit, but I don’t think there’s something specific.
Do certain things make an audit more likely, such as having an office in the home? It seems like the home office is not as big a deal as it used to be. On the other hand, if the auditor wants to look at the home office and finds the kids’ toys in there, they might challenge it.