The IRS keeps a close eye on self-employed individuals. Here's what it looks for.

The IRS claims that most tax cheats are in the ranks of the self-employed, so it is not surprising that the IRS scrutinizes this group closely. As a result, the self-employed are more likely to get audited than regular employees. If you are self-employed, stick to these two rules, at a minimum, to avoid trouble in case you are audited: Claim all of your income, and don't take deductions for items you didn't have to pay for.

If you are self-employed and the IRS chooses to come after you by way of a tax audit -- or, worse, a criminal investigation -- be aware that the agency can obtain your bank records and other financial records. If you've been foolish enough to deposit unreported income in your bank accounts, an IRS auditor may find out.

One good way to see that payroll taxes get paid on time is to use a bonded payroll tax service to both file your payroll tax returns and make all payroll tax deposits. Many banks, as well as businesses called payroll services companies, offer this at reasonable prices. If they goof up and don't get a form or payment in on time, they will pay the late payment penalty.