The IRS is greatly increasing the rate of tax audits on higher income taxpayers and businesses. The audit rate started dropping in 1998 because of restructuring at the IRS. It bottomed in 2000, when just 0.5 percent of individual tax returns were audited but doubled that rate by 2007, to 1 percent.
Audits of the Wealthy. Audits of those who make more than $1 million a year jumped 84 percent from fiscal 2006 to 2007, according to IRS figures. Those taxpayers have a 9 percent likelihood of being audited. That's nine times as much as the average taxpayer.
Small Business Audits. But when it comes to businesses, the IRS is stepping up audits on smaller and mid-sized firms. The IRS targets sole proprietorships that report income on Schedule C with a 6 percent chance of getting audited.
"We have increased our focus on mid-market corporations - those with assets between $10 million and $50 million," the IRS said in a statement.