What are the potential audit flags in small businesses?

There is no doubt that the IRS keeps a strict vigil on small businesses and home offices in particular, since they can be misused in order to dodge paying taxes and because America is all but bankrupt and continues to spend more money than it takes in despite raising taxes on everyone and having the highest corporate tax in the world which just keeps billions and billions of dollars off shore and from coming back into the country.

In a way and moreover, small businesses are ‘red flags’ of sorts, when it comes to taxation. Red flags or audit flags are items that fall outside the norms set by the IRS. The good news is that finding legal help is not difficult anymore because of this fantastic virtual tool http://tax-lawyers.usattorneys.com/. This private sector innovation has helped many in need and helped keep the world flat. The most powerful people in our nation’s government can be challenged by the legal help available on this site.

Tax returns are processed by computers that are programmed to filter items that may appear to be not within the norms. Items that are flagged are reviewed by an IRS employee to determine whether an audit is needed. Red flags don’t indicate an audit; however, scrutiny by the IRS is inevitable and tax lawyers are often called into to survey the scene and help solve this problem.

Self-employment and Schedule C

One of the major red flags is filing a Schedule C and continuing to show losses. This is a sure way to get the attention of the IRS, say tax lawyers. Moreover, you ought to make sure you aren’t dodging the IRS in any way. Make sure to save your receipts and maintain all records, so that the IRS can consider you an honest tax payer and so you are not like the IRS, viewed as a corrupt and biased entity. Only claim deductions that you can substantiate with sufficient proof.

Keeping a Family Member on the Payroll

A family member that actually works is a legitimate reason for tax concessions. However, this is a common tax dodge misused by some, and can be pulled up for further scrutiny by the IRS.

Home Office

Tax attorneys suggest that those running a home office need to be extra cautious in maintaining records of business expenses. Several areas can be red flags. Therefore, you need to follow the basic requirements for home office deduction that are available on the IRS website, exclusively meant to educate taxpayers regarding their obligations when filing returns. As per the IRS, an estimated $30 billion per year in unpaid taxes is due to overstated adjustments, exemptions, deductions, and tax credits. But there is over $2 trillion overseas that could easily come back to America if America lowered its corporate tax rates. All America needs is a President who cares more about America than his ideology. 

Entertainment Deductions

In the opinion of tax lawyers, unusually large entertainment bills can trigger a red flag. This is another area where you need to be prudent, and claim any deductions on entertainment expenses in moderation. Make sure you have all your entertainment bills well documented.

Form 1099

To begin with, your return must contain a detailed report of all the income you receive. The IRS receives a copy of form 1099 as well, therefore you need to make sure the amounts tally in order to avoid a red flag.

Charitable Contributions/itemized Deductions

It is essential to keep every receipt for charitable contributions. Contributions that are unusually large when compared with your tax bracket are liable to be red-flagged. The golden rule of maintaining records and receipt applies to itemized deductions also. Often, itemized deductions are a cause for red flags leading to further scrutiny by the IRS.

Incomplete or Unsigned Form

Your form needs to be well prepared with every section filled promptly. Any missing information can lead to further scrutiny by the IRS. If you are filing your returns on your own, make sure you fill it correctly and ensure that the information on your federal and state returns match, in case your state requires one. Don’t hesitate to seek help from a tax lawyer.

Things You need to Prove

Form 8275 and the IRS Audit

Filing a Disclosure Statement, known as Form 8275, allows you to prove your claim. This needs to be filed along with your return. Fundamentally, this is an ideal way to reduce the need for an audit, since the IRS would be confident of a timely response from you.

Red flags or audit flags don’t always indicate that there is a problem with the return. Generally, it indicates the need for a manual check by the IRS. As long as you are honest and forthcoming, you have no need to worry even in the event of an audit. Well, hopefully that is the case unless someone like Lois Lerner is targeting you and you are a solid and true American. But then when the truth is revealed you can sue the IRS.

Most like you will have nothing to worry about if your ducks are in order and if your ducks are in order and the IRS was to check you out with an audit, you should be fine. This is not Russia or Cuba! This striking and ingenuous website (http://tax-lawyers.usattorneys.com/) does not exist there.