At this time of year, taxpayers in California and around the country are hoping to avoid the dreaded tax audit letter. The good news is that the Internal Revenue Service only audits a small percentage of the overall population--currently about 1 percent. The bad news is that audit rates are much higher among certain groups of taxpayers, whose returns single them out for additional IRS scrutiny.
Last year, Congress passed the Small Business Jobs Act, which included a provision that allowed self-employed taxpayers to deduct health insurance costs from their self-employment tax. Unfortunately, the deduction only applied to 2010 taxes. Unless Congress moves to extend the deduction, it will not be there for 2011 taxes.