Yes, I realize that, and it's stupid for them to do that on a single year basis for this reason, among others. I had them audit me one year for essentially the same reason but different circumstances. I paid out a large portion of my 1099 income to subcontractors and sent the contractors the required 1099's with the copies and summary sent to the IRS as required. But the IRS just kept ignoring that. I finally had to write letters to all my congressional representatives, supplying them with everything, to get the IRS off my back. Another similar prior circumstance, was when I had a contract with subs that was paying me faster than the subs could do their part of the work, so I was holding amounts as deposits for future work by subs. IRS audited me several years for that same reason. They should be using a moving five-year average for comparisons of income reported on 1099 to gross income for the business. And why this entire 1099 debacle does not apply to corporations escapes me.
