A new report from the Treasury Inspector General (TIG) says that IRS auditors don't do enough to uncover tax deficiencies of sole proprietors. (Ref. No. 2010-30-024, 2/24/10)
When it reviewed the correspondence audits of 2007 returns, the TIG discovered that examiners missed more than $16 million in unpaid taxes, largely attributable to the failure to file income tax returns or underreporting of taxable income. But more in-depth analysis would slow down correspondence audits.
The IRS plans to revise its audit selection procedures for sole proprietors so that its examiners can address these issues in face-to-face meetings.