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Choosing To Change My Business

My name is Sandra, and I have always loved business. From the time I was a young child, I knew that I wanted to have a profitable, thriving business one day. I thought long and hard about what to do in order to create the business of my dreams, and it occurred to me that I needed to hire a consultant who knew what to do. Right after I registered my business with the state, I started working with a business consultant who helped me to get off on the right foot. Check out this blog for more information about how a consultant could help you.

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5 Red Flags That Could Trigger An IRS Audit

While the risk of getting audited by the Internal Revenue Service (IRS) is fairly low, many tax payers worry they may accidentally trigger an audit.  According to NOLO, less than 1% of people who earn between $25,000 and $100,000 a year are audited. In most cases, an audit is triggered by a simple mistake, such as an incorrect social security number or mathematical error. Here's a look at the most common red flags that could trigger an IRS audit.

1. Not Reporting Income

If you have reported income in the past and failed to report income come tax time, you may be audited. If you receive income from numerous institutions, you may forget to claim all your income sources. As all institutions report back to the IRS, failing to claim all of your income could trigger an audit.

2. Making Too Much Money

The more money you make the greater risk of an IRS audit. Higher incomes generally result in more complex tax returns and higher claims. These complicated tax returns can trigger an audit. In many cases, humans must manually process these tax returns instead of the usual automated service.

3. Not Identifying Foreign Bank Accounts

People who have foreign bank accounts must provide details about the accounts in their tax returns. The law requires foreign banks to identify any American asset holders and provide this information directly to the IRS. When completing taxes, individuals must report all foreign assets and identify the highest dollar amount the account held in the previous year.

4. Large Charitable Deductions

Many people use charitable contributions as write offs on their taxes. However, taking charitable deductions that are too large can raise a red flag. The IRS will generally look at your charitable donations in comparison with the average charitable donation given by individuals at your income level.

5. Deducting Business Travel

While some business claims are legitimate, others can trigger an IRS audit. For individuals who are self-employed, Schedule C offers a plethora of deductions that can help you save money. However, many self-employed individuals take advantage and claim excessive deductions, such as expensive business meals, travel and entertainment expenses. To qualify for a business meal or entertainment deduction, you must have detailed records of the expense, the people attending and the business purpose.

While the chance of getting audited is relatively low, it's important to understand how to properly complete your taxes to prevent setting off red flags. Giving someone in your business audit senior training can help you understand the auditing process at all levels of business and personal income, therefore helping you to file correctly every time.