This past year was the first year that I was fortunate enough to work from my home. Working from my home has been a wonderful change for both personal and professional reasons. The only thing that caused a slight issue was the tax filing changes that I had to endure. The office in my home was now considered a tax deduction. I had to get some help learning how to deduct the things that are allowed on my federal taxes. If you are new to working from home and have a home office, this blog can help you learn what you need to know before tax time rolls around.
If you want to reduce the chance that your tax return will get audited this year and reviewed by the IRS with a fine tooth comb, make sure that you are not doing anything that will raise the suspicion of the IRS. Here are a few things you need to avoid on your tax returns this year so that they go through without a second glance.
Be Careful About What You Claim As A Business
If you claim that you run a business on your tax returns, make sure that you are actually running a business. If you ended up deducting a loss for your business for multiple years in a row, the IRS is going to start getting suspicious of your business. Eventually, your business should start making money. If you are losing money every year, what you are doing may not be a business.
This usually applied to individuals who run a "business" on the side, such as breeding and selling dogs or selling crafts online. If over multiple years you continue to not make any money at this side "business", what you have may be considered a hobby by the IRS instead of a business.
If you want your side business to not flag an audit, you need to eventually make some money with it.
Don't Leave Off Any Of Your Income Sources
You need to claim all of the money that you made on your taxes. Generally, when you make money, you are not the only person reporting it, which makes it easier for the IRS to figure out when you are trying to hide income from them.
For example, if you do freelance work on the side and fail to put that income on your taxes, the business you did work for may file a 1099 form for the work you did, thus making the IRS aware of that income. Or, if you have investments in foreign banks, many of those banks share interest earned with the IRS, once again putting you in the hot seat.
Remember, when you make income, no matter the source, there is a high chance that that income is getting reported to the IRS some way or another by the party the money came from, so make sure that you don't leave anything off your taxes.
Watch Your Charitable Contributions
Most people do not donate the majority of their income to charities. If you donate a large percentage of your overall income to charities, you are going to want to keep detailed records of all your donations.
Donating too much to charities may raise a red flag with the IRS.
Make sure that your tax returns do not include any of the warning signs listed above. The real key to avoiding an audit by the IRS is to make sure that everything you claim is truthful and can be backed up with detailed records. If you need help with your taxes, look for services for tax preparation in your hometown.Share
21 January 2016