It is the most dreaded letter a taxpayer can receive.

Dear Taxpayer,
Some of the information that you provided to us does not agree with the information we received from other sources. -- The Internal Revenue Service.

You've just joined an elite club, one whose initiation ritual is an IRS audit. Unfortunately, you can't refuse membership -- and the dues could be astronomical.

When the IRS Reform and Restructuring Act was enacted in 1998, lawmakers ordered the agency to focus more on taxpayer rights instead of collection activities. Not surprisingly, the number of audits -- or examinations, as the agency prefers to call them -- dropped dramatically.

In the first year of the kinder, gentler IRS, about one out of every 79 tax returns were audited. By 2003, it was even easier for tax scofflaws; that year, according to IRS data, only one of every 150 individual taxpayers were audited.

But the tax times, they are a-changing.

More audit attention
In February, the IRS announced it was initiating investigations into some U.S. taxpayers who have bank accounts in Liechtenstein. The move comes in the wake of a major, and ever-widening, tax-evasion scandal that began in Germany.

U.S. officials say they just want to make sure that American owners of accounts in the tiny Alpine tax-haven of Liechtenstein are properly reporting their income and making required tax payments on the money. That's right in line with data released in January that shows during 2007 the IRS audited 84 percent more returns of individuals who the previous year reported incomes of $1 million or more.

But the rich aren't the only targets. Although such taxpayers offer a better chance for increased collections, the IRS says that overall, the total individual returns audited increased in 2007 by 7 percent to almost 1.4 million. That's the highest number of audits -- or as the IRS likes to call them, examinations -- since 1998.

And if you're a small business person, either as a partnership or a Schedule C filer reporting self-employment income on your personal tax return, the IRS is paying added attention. Audits of businesses in 2007, according to the IRS data, jumped almost 14 percent over the prior tax year. Watch "Odds of being audited"

There's a good reason for the IRS's increased interest in such filings. Because self-employment income typically has no verification mechanism (i.e., the IRS can't double check much of it in the way it can verify wage income via an employer-issued W-2), tax officials believe that many small business people underreport their income.

Crackdown to continue
You can count on the tax-cheat crackdown to continue.

Washington, D.C., lawmakers, who once demanded the IRS give taxpayers the benefit of the doubt, are applauding the new aggressive approach. The reason? Members of Congress are hoping that enhanced enforcement efforts will help close the $345 billion tax gap. That amount, based on 2001 figures, represents the difference between what taxpayers should have paid and what they actually paid. Without some help from additional IRS collections, Capitol Hill faces the prospect of raising taxes.

In releasing its increased 2007 audit numbers, the IRS seemed to be following the Congressional tax gap script. The announcement emphasized the agency's commitment to "strong progress in a number of key enforcement areas," and noted, "The IRS is showing consistent improvements in areas critical to maintaining a fair, efficient tax system while bringing billions of additional dollars into the Treasury."

One of the best ways to avoid ending up in the IRS audit sights, whatever your income level, is to be sure that in your zeal to cut your tax bill you don't send the wrong message on your Form 1040.

What's the DIF?
"Don't draw any more attention to your return than you need to," says Robert G. Nath, author of "The Unofficial Guide to Dealing with the IRS." "Simple, plain-vanilla returns are fairly safe."