The IRS has targeted self-employed (Schedule C) taxpayers for audits for good reason. The IRS believes that many Schedule C filers do not report all of their income and/or overstate their business deductions. In addition, many Schedule C filers do not keep accurate business records, with the result that the IRS disallows many deductions that would be defensible if they were properly recorded. Schedule C taxpayers high on the list of IRS audit targets.
Here are nine (9) major considerations taxpayers should expect to be reviewed in this type of IRS Audit:
- How do you differentiate an independent contractor from an employee?
- Did you file a complete tax return? Did you fill out all the lines on Schedule C?
- Do you have the required documentation on auto, meals, and entertainment deductions?
- Did you take the home office deduction? Do you comply with the rules regarding this deduction?
- Are you employing a spouse and other family members?
- Have you considered the hobby loss rules and their impact on the Schedule C filer?
- Can extending the filing date of you tax return reduce the chance of an IRS audit?
- Can you take advantage of the cash method of accounting?
- Did you contribute to a pension or individual retirement account (IRA)?
If you are the victim of an IRS audit, or to find out more, visit www.taxpayerresolution.com.
