From the IRS's own web site:
Do You Need to File a Federal Income Tax Return?
"For tax year 2007 only, many taxpayers who would not normally need to file a federal income tax return will need to file one in order to ensure that they receive an Economic Stimulus Payment (commonly referred to as "rebate")."
"To determine if you need to file a Federal Income Tax return for 2007 answer the following questions:"
You see, even the IRS says up front that some folks do not need to file!
And if you show a large drop in income--the IRS can and does ask people to come in for an audit or examination to show what their income was. They'll ask you to bring your bank records (checking and saving) and other papers with you. If you can substantiate your claims, no problem. But if your paperwork doesn't back up your story--problem. If your tax return shows a major change in any single
year, and that trips an audit flag? Yup, "Please call this office to make an appointment".
Someone who is self-employed can expect some type of audit/review/examination once about every 22-25 years, in other words, once in your career simply because that's the percent of Schedule-C filers they pull at random to look at more closely. Quite your job and take off to go sailing--and take the radical income hit--and your odds probably will go up because of the change in gross income. Once they see the bank statements (which they'll get with or without permission) and the other paperwork, no problem--if you've cooperated. If you say "no", they tend to keep digging. Much faster and simpler to just say "yes" and hand over everything in order, which tends to support your story. They know there are oddballs amongst us, they just need the paperwork to confirm that.<G>