Tuesday, August 14, 2007
The GAO has released A Strategy for Reducing the Gap Should Include Options for Addressing Sole Proprietor Noncompliance (GAO-07-1014):
Based on what IRS examiners could find, most sole proprietors, at least an estimated 61%, underreported net business income, but a small proportion of them accounted for the bulk of understated taxes. Both gross income and expenses were misreported. Most of the resulting understated taxes were in relatively small amounts. Half the understatements that IRS examiners could find were less than $903. However, 10% the tax understatements, made by over 1 million sole proprietors, were above $6,200. In this top group, the mean understatement of tax was $18,000.
For more, see Joe Kristan, 80-20 Rule and Tax Noncompliance.