According to Stacy Cowley of the New York Times, only around 1.5 percent of self-employed taxpayers are audited each year. Audits are not random, because the IRS has a secret algorithm that calculates how likely each taxpayer is to have unreported income. In looking at sizing up the honesty of small-business owners, the Taxpayer Advocate Service, an independent office within the I.R.S., has found that there are certain geographic areas where tax dodging among sole proprietors is more prevalent.
1. Where are the tax dodging clusters?
2. Where are the high tax compliance areas?
3. According to the article, what typically happens after an audit for a small business?
4. What finding from the research was most interesting to you and why?
Cowley, S. (2016). Why the I.R.S. Fails to Crack the Small-Business Tax Nut. The New York Times, June 15 (Retrievable online at http://www.nytimes.com/2016/06/16/business/smallbusiness/why-the-irs-fails-to-crack-the-small-business-tax-nut.html)