Simply lovely small business news on the eve of the day when US taxes are due: TRAC reveals how smaller businesses are much more likely now to be audited than larger ones.

This despite the fact that auditing larger corporations is much more efficient in terms of collecting missed taxes.

Although the state of the economy, the nature of enforcement and other factors can influence the overall outcomes, enforcement dollars collected as a result of all audits — individuals, businesses, estates, gifts, etc. — continued their downward slide and has now fallen below the levels of five years ago (see Table 5).

The finding that the IRS appears to have misdirected its work force is underlined by the fact that while audit hours aimed at the largest entities were sharply cut, the hours the agency chose to focus on other corporations increased. For example, since FY 2005 the audit hours for the small companies (less than $10 million in assets) jumped by 30 percent and the hours devoted to examining mid-size companies (assets of $10 million to less than $250 million) increased by 13 percent (see Figure 5).

Great, albeit depressing, work by TRAC, with lots of numbers and tables to back up their assertions.