IRS to start auditing more tax returns?

The IRS has long targeted self-employed taxpayers (aka independent contractors and freelancers) for audits. But the agency might start auditing even more people who own their own business and work for themselves. Mark Minassian, the About.com Guide to Business Law and Taxes, says not just contractors, but farmers, small businesses, gamblers, and investors are at greater risk for a tax audit.

How can taxpayers protect themselves? In a recent interview on the Freelance Writers site, I urged independent contractors to be diligent about their record-keeping and to consider several easy-to-use financial software.

More information:

• Publication 556, Examination of Returns
• Publication 583, Starting a Business and Keeping Records
• Understanding the Tax Gap (from the IRS' perspective)
• Tax Gap: Which Way? (from Joe Kristan at Roth & Co.)