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Another Reason to Fear the IRS: Misclassification Crackdowns

Daniel Werfel, acting commissioner of the IRS, waits to start a House Appropriations subcommittee hearing on June 3
Daniel Werfel, acting commissioner of the IRS, waits to start a House Appropriations subcommittee hearing on June 3Photograph by Andrew Harrer/Bloomberg

Small business owners have reason to be wary of the Internal Revenue Service, given research that shows certain types of small companies (pdf), including sole proprietors, are more likely than their larger counterparts to be audited. Lately, it seems, there’s even more reason to fear the taxman.

Last month, acting IRS head Daniel Werfel appeared before the House Small Business Committee to explain how the agency selects small businesses for audits. (Computers do it, Werfel said.) More recently, the agency sent letters to thousands of small business owners asking them to explain possible income underreporting.