Whether you are filing taxes for yourself or your small business, there are many things to consider when going over your deductions; especially if you do not want the attention of the IRS. With this in mind, we at Mark Dicus & Company would point out the deductions that often raise some red flags when the IRS reviews the tax return.
IRS Red Flags & Audit Triggers
1) A $200,000 Income or Over. Be sure to report all sources of income, other than that, there is little you can do to avoid attention on incomes over $200K.
2) Large Charitable Donations. The IRS’s interest is triggered when you donate significant amount of money to charity that’s disproportionate with your income. Be sure to be prepared to always provide documentation if it is questioned.
3) Foreign Bank Accounts. Foreign accounts do need to be reported. The rules have changed when it comes to reporting. In the event aggregate balance exceeds $10,000 at any time in the year, taxpayers who have interest in or signature authority over foreign financial accounts must report them to the Treasury.
4) Early Retirement Withdrawal. Before the age of 59 and a 1⁄2, withdrawing from a retirement account for something other than a first-time home, education expense, or emergency medical issue will cause suspicion from the IRS and lead to questions, particularly if not reported on your tax return.
5) Rental Losses. To avoid trouble by backing up your claim with documentation, if you are not a real estate professional, the IRS might ask questions if you claim rental losses.
6) Unreported Income. You will be audited in the event the IRS finds out about another source of income that you did not claim on your taxes. For smooth seas ahead, being upfront and honest will is essential.
7) Business Ownership. The IRS typically takes a closer look at business owners since many business owners have claimed falsely in the past. Do not claim exaggerated deductions and make sure to claim your actual income.
8) Vehicle Used for Business. You should be able to bypass any additional questions the IRS might have for you as long as you are good at recording each business trip with the dates and mileage.
9) Excessively Extreme Deductions. Though it is nothing that proper documentation can’t solve, claiming large amounts on deductions might raise a few alarm bells with the IRS.
10) Large Business Expenses. Be prepared to validate your deductions with documentation if you claim a large amount for business meals or travel.
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To help you with your business and/or business taxes, accounting, and financial consulting services, call the experts Mark Dicus & Company. Our experts are readily available to provide you with high-quality services. Contact our friendly office today to schedule your consultation and our qualified experts can help you with your questions and concerns.