Small Businesses Face More IRS Audits Than Their Larger Counterparts

By Frank L. Brunetti on August 6th, 2012

Small Business Audits

Businesses often face a great deal of scrutiny by the Internal Revenue Service to ensure they are in full compliance with federal tax law. However, new reports show that small companies may receive more attention from the federal tax agency than larger companies, making it crucial that owners proceed with caution.

The 2011 Enforcement and Service Results report released by the IRS reveals that 1.02 percent – or 19,697 – of small businesses with assets below $10 million were audited last year. This rate, compared with the 2004 report, in which only 0.32 percent of small companies were examined, represents the highest level of business audits in the last several years. A separate study conducted by tax analysts revealed that larger entities, namely hedge funds, private equity corporations and venture capitalists, have undergone fewer audits in recent years.