We specialize as California tax debt experts by helping our clients with federal and state tax resolution and compliance. Our mission is to make sure that you go through each step of the process well-informed and at ease.
We are the trusted partner that stays beside you supplying expert help and valuable information all along the way. That said, here’s a list of four common triggers for IRS audits you might want to keep handy for future reference.
It’s important to keep in mind that the IRS looks at your deductions in relation to your income. One of the biggest ways to attract negative attention from the IRS is to have large deductions with low income. Even if you’re in the first year of a start-up, you should keep detailed documentation to prove your deductions are actually helping you get up on your financial feet.
Obvious Home Office Deductions
Even though more and more Americans are working from home these days, the IRS remains rightfully suspicious of some of the deductions these business owners file. For example, you’ll need to be able to prove you use your phone for business and not pleasure.
Keep in mind that your deductions for home office expenses need to be reasonable. For example, it’s not likely you’ll get to deduct your television set because you can bring your laptop down on the sofa and watch TV while you work.
Over The Top Entertainment Deductions
Our California tax debt experts also caution against making excessive entertainment deductions when you are in business. Many small business owners think they can take clients out for a meal, and while that’s true, there are some stipulations involved.
Not only do you need to keep your receipts, but documentation of who you talked to and how it related to business. Beyond receipts, the IRS looks for the kind of details that make entertainment expenses look legitimate.
Finally, you need to do your homework about making sure your vehicle expense deductions are correct too. For example, if you only have one car and you claim it as a 100% business deduction, you’ll be raising red flags.
Best practice here is to have a detailed mileage log so you can improve your deductions. We are always here to answer any of your questions and help you. We are the California tax debt experts that care.