PROFESSIONAL FREEDOM TAX SERVICE

WE WON'T FILE UNTIL YOU SMILE!

Tax Service Blog

Blog

6 Tax Red Flags That Can Get You Audited

Posted on December 6, 2014 at 12:31 PM
Nobody wants to be audited. But about 1 in 150 of us will experience some type of audit in our lifetime. That’s the bad news. The good news is that if you avoid these six potential red flags, you may be able reduce your chances of getting the dreaded audit notice in the future.
 
1. You don’t disclose all of your income.
 
This one sounds like common sense, but you’d be surprised. The IRS gets copies of your W-2’s, 1099’s that report your interest, dividends, capital gains and losses from investments (sales of stocks, bonds, mutual funds, etc), compensation paid to you as a self-employed independent contractor, and other income items. Make sure you collect all of your statements from work, investments, etc., because they sure will. Also, when it comes to taxes, it’s smart to measure twice, cut once. Make sure that someone (whether it’s you or your accountant) double checks your return.
 
2. You have a big mouth.
 
Never, never brag (especially on social media) that you pulled a fast one on the IRS. In today’s economic climate, the IRS does more trolling than ever before — especially on social websites like Facebook and Twitter. Not to mention the fact that whistleblowers can earn some significant rewards (15% to 30% by filing form 211) for turning in cheats.
 
3. The dreaded home office tax deduction.
 
The home office tax deduction has been a long-standing audit red flag item. The IRS recently created a limited safe harbor that allows taxpayers to take a deduction of $5 per square foot up to 300 square feet. Remember to ask yourself whether an office is being provided for you by your employer even if you work a good amount out of the home — better safe than sorry.
 
4. You have an unincorporated business (Schedule C Sole Proprietor).
 
If your tax return includes Schedule C, which is used by sole proprietors and self-employed independent contractors to report their business income and deductions, you have a higher likelihood of being audited by the IRS. Schedule C filers are more likely to file an incorrect tax return, as many are self-prepared, and they tend to under-report income and over-report deductions. Also, as a Schedule C filer reporting operating losses over a period of years, the IRS could consider your business a hobby if you haven’t turned a profit over three of the last five years. If this happens, you could have your deductions disallowed by the IRS.
 
5. You make too much money.
 
Sounds like a high class problem, right? But the statistics back it up. As you make more money, you have a higher percentage chance of facing an audit- especially business owners that have an LLC or an S Corporation. Here are the odds:
  • Those making $200,000 to $500,000 approximately 1 in 50
  • Those making $500,000 to $1,000,000 approximately 1 in 25
  • Those making $1,000,000 to $5,000,000 approximately 1 in 10
  • Those making $5,000,000 to $10,000,000 approximately 1 in 5
  • Those making $10,000,000 and above approximately 1 in 3
 
6. You were too charitable.
 
Donating is great, but you run a higher risk when you claim above $500 in non-cash charitable donations. To mitigate this risk, be sure you file form 8283 and have very clear documentation. A good website to use for basic item valuations is www.satruck.com (see the Donation Value Guide).
Part of the auditing process is highly randomized, so you may not be able to avoid an audit regardless of how careful you are. But using these tips can help shrink your risk!

Categories: Information

Post a Comment

Oops!

Oops, you forgot something.

Oops!

The words you entered did not match the given text. Please try again.

52 Comments

Reply Brittany Harris
8:17 PM on January 28, 2015 
Great customer service!!!
Reply Stock market expert trading tips
10:13 AM on March 16, 2015 
I very rarely see such kind of interesting and informative post on tax audit..Thanks indeed for sharing I was searching similar type of information.Its quite informative and i have learn so many new things here
Reply Note counting machines and Fake note detectors
12:15 PM on March 17, 2015 
It is in point of fact a nice and useful piece of information on tax audit. I'm satisfied that you simply shared this useful information with us. Please stay us informed like this. Thanks for sharing.
Reply RFID protection sleeves for Credit and Debit cards
10:55 AM on June 10, 2015 
I can see that you are an expert at your field! . The post regarding tax issues is great.Thanks for all your help and wishing you all the success in your business.
Reply Stock/Commodity Market Blog
12:32 PM on September 8, 2015 
Nobody wants to be audited. But about 1 in 150 of us will experience some type of audit in our lifetime.......What a commendable work you have done, with simplest of language. I can’t resist myself to leave a comment and trust me it’s hard to impress me......
Reply Stock Trading Tips
8:18 AM on June 11, 2016 
It’s pretty good post. I just stumbled upon your blog and wanted to say that I’ve really enjoyed reading your blog posts. In any case I’ll be subscribing to your feed and I hope you post again soon.
Reply olymptrade
8:53 PM on May 22, 2018 
This is an incredible rousing article.I am basically satisfied with your great work.You put truly exceptionally accommodating data...
Reply loemrntdherid1
5:41 AM on May 23, 2018 
I have to say that the information here was the most complete that I found anywhere. I am definitely bookmarking this to come back and read later.
Reply nightrush
1:48 PM on July 9, 2018 
On the off chance that you are searching for a well known game to wager on, baseball may not be the best rundown.
Reply MMR Accountnats
6:09 AM on July 18, 2018 
Feeling very happy to see this article which is about 6 tax red flags. You have shared all the details of these tax here with us.
Reply Intraday stock tips
9:30 AM on September 14, 2018 
Such a nice and informative blog you have shared here with us. Your all blogs are so useful for every person. Keep posting more like this.
Reply Intraday stock tips
9:26 AM on September 19, 2018 

Thanks for sharing such a useful and informative post like this. Keep updating more updates like th
Reply Term Paper Writing
9:05 AM on October 4, 2018 
Only Professional Writers Can Make This Kind Of Material, Cheers
Reply Crypto Technical Analysis
10:52 AM on October 4, 2018 
My Friend Recommended This Blog And He Was Totally Right Keep Up The Good Work
Reply agt the champions winner
10:59 AM on November 17, 2018 
I’m really happy to say it was an interesting post to read. I learned new information from your article, you are doing a great job. Continue
Reply Cheap Food Service Forms
9:58 AM on December 20, 2018 
It is really great post and i really enjoy when i am reading this article. Thank you for sharing this great post with us. It is really happy to see this.
Reply bstptoscapan
10:38 AM on January 8, 2019 
For clients, Android just works ideal out of the crate. Also, clients can modify their telephone encounter generously. It is, as indicated by a few examinations, the most alluring portable working best keyboard apps for android
Reply affordable seo company
12:09 PM on January 28, 2019 
If you don"t mind proceed with this extraordinary work and I anticipate a greater amount of your magnificent blog entries
Reply mldremaltrev
12:03 PM on February 21, 2019 
We are the head tree administration organization in the Denver zone, offering low costs and incredible administration. With a portion of the best experts, you can make certain that you are getting mold removal atlanta reviews
Reply festivesalwsuit
5:03 AM on February 23, 2019 
I think it originated from a period and a domain in which I felt so much love, I felt such a high knowing, that I was in charge of bringing another life into this world… my maternal senses were BFestive Salwar Suits
0