Uncle Sam audits small business more than ever

The taxman is gunning for small business owners these days and going easier on bigger companies, according to IRS data analyzed by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University. The IRS increased the number of audits of smaller businesses while at the same time decreasing the number of audits for particularly large businesses.

Companies with assets of $5 million or less-which encompasses most veterinary practices-were audited 41 percent more in 2007 than in 2005. Those with assets of $50 million to $250 million were audited roughly 30 percent less. Compare these numbers to the largest corporations: Businesses with more than $250 million in assets were audited 38 percent less.

The report's authors can't verify why the IRS has changed its auditing focus for companies in the past few years. But they suspect it may be a result of the IRS trying to boost its number of audits and ignoring the financial benefits of going after larger companies. Large-company audits take longer to complete but also yield significantly more tax revenue than small business audits.