Small business owners frequently prefer to set up as small business partnerships to avoid the expenses and bureaucracy involved in forming a corporation. A surge in these types of partnerships over the past few years has brought this sector under increased IRS scrutiny at tax time. Flow-through entities in particular have attracted the auditors’ special attention. Flow-through or pass-through business structures include both S corporations and sole proprietorships. Income from these businesses is often filed as individual taxpayer filings. Auditors are especially keen to look carefully at these filings.  

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