Reducing Chance of Tax Audit

Sole proprietors tend to be more likely to file incorrect returns (many are self-prepared), and tend to underreport revenue or overreport deductions.

For these reasons, the IRS has audited a much higher percentage of sole proprietor tax filings than corporate filings in recent years.

In tax year 2004, a Schedule C filer stood a 1 in 33 chance of being audited. For nonbusiness filers, the odds were around 1 in 130.

This means that sole proprietors are significantly more likely to be audited!