Avoiding IRS Audit

By Joyce Pearson, Esq

Forging a Path to Success

IRS computer scan (especially showing a loss on your schedule C)

IRS Compilation audit Failure to file a tax return when W-2s or 1099s have been filed File the tax return late (Never do that = Too many penalties)

Income $100,000 aprox

Having proper documentation to prove the deductions taken during an audit is key to the success.

What is expected of you?

• Who you met • When you met • Business purpose • Amount pays

• Receipts for promotional expenses • Costs of advertising credit report expenses (sometimes tracked by employer) • Telephone expenses • Staging expenses • W-2 or 1099 for hiring secretarial and employee assistants should be issued annually. Failure to issue 1099s when you have taken the deduction can result in disallowance of the deduction and penalties.

•  An appointment calendar showing mileage used on your automobile for scheduled appointments and the distance for the round trip in order to compile the mileage.

And of course, as you awaken to greet the New Year, you will want to rush into your garage and write down the beginning mileage on your car's odometer.

Frequently, mileage can be tracked through auto repair receipts, a good alternate source of the detail you need to have for an audit, and auditors will often use.

Realtors are classified as independent contractors (Employers use form 1099 to report their income to IRS) - and report income on your individual income tax return this give you advantages and creates pitfalls.

Expenses a realtor may use for deductions: • Promotional expenses • Costs of advertising • Credit Reports • Telephone costs • Meals and entertainment • Automobile expenses and/or mileage

Expenses a realtor may use for deductions: • Office in the home deduction • Safe harbor (up to $1500) vs Actual cost • Staging furniture to assist in the sale of the house

By Joyce Pearson, Esq

Forging a Path to Success