Tax time can be stressful: meeting deadlines, finding invoices and receipts, and figuring out how much to write off while avoiding an audit. An accountant can alleviate some of the stress, but not all of it!
A colleague of mine published these tips in their newsletter, figured I’d share. Here’s a list of things to avoid if you would prefer NOT to undergo an IRS audit:
Eleven Red Flags The IRS Looks For:
1.) Forgetting to claim income that is already being reported to the IRS.
2.) ROUND numbers are always a flag.
3.) Large deductions for travel & entertainment. Computer programs at the IRS establish norms. Taxpayers that are outliers are at a higher risk of audit. In addition, the IRS is aware that taxpayers often don’t have receipts or substantiation for these items.
4.) Large deductions for charitable contributions.
5.) Offshore accounts that are not reported to the IRS. These fines can be as high as $60,000.
6.) For Schedule C’s: large losses, large “repair” expenses, bad debt deductions, and independent contractors.
7.) Low, or no officer’s wages on an S corporation tax return.
8.) Claiming hobby losses as business losses.
9.) Claiming large loss carryovers.
10.) Claiming a large refund on an amended return.
11.) Failing to file!
Following the tax law makes the always fast approaching tax season far less stressful. Keep these tips in mind, unless you’d like an IRS agent to personally ensure your books are in order.
Copyright Sullivan & Gannon 2014
