A study is shedding new light on just who should most fear a federal tax audit. Small-business owners—who often deal in cash—are eyed more warily than others, says the report by the National Taxpayer Advocate, an independent office within the IRS. And location matters. According to secret data used in the report, sole proprietorships in the rich suburbs of Los Angeles are of particular concern, as are those in suburbs of San Francisco, Houston, Atlanta, and Washington, DC.
Many of the locations mentioned are very well-off, the AP notes; the IRS is more likely to audit higher-income people. Those who take huge deductions relative to their salary raise red flags, experts say. The businesses most likely to cheat, per the data: real estate and construction companies. Among the least likely: people in professional services, including lawyers, accountants, and architects. Meanwhile, people who live in Alaska's Aleutian Islands; West Somerville, Mass.; and the Bronx neighborhood of Mott Haven are among the least likely to cheat, researchers found. (Read more IRS stories.)