How to Get Ready for an IRS Audit

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The IRS examined just over 1 percent of all individual tax returns for the 2011 tax year, but the self-employed are more likely to be asked to document their returns, says Jackie Perlman, principal tax analyst at the Tax Institute, the research and analysis division of tax prep company H&R Block. There’s good reason for that. Unlike wage earners who receive W-2s from their employers, the self-employed, especially those in cash businesses, are essentially on the honor system when it comes to reporting income.

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