18 Aug
2011
18 Aug
'11
9:18 a.m.
> Actually, some IRS agents consider home
businesses and small sole
> proprietorships to be "low hanging fruit". ?They OFTEN audit home
> businesses,
On Tue, 16 Aug 2011, William Donzelli wrote:
This is true ONLY for those home business that are
greedy -
WRONG
I might be the greediest SOB who ever walked the earth' OK, we will ASSUME
that, and you are the least greedy, most altruistic saint, . . .
trying to
deduct too much, for example. Living beyond the means of the business
income is another. Or too many cash or check deposits at the bank.
As long as you have half a brain, and not try to cheat too much - no
audits. Simple.
WRONG.
Selection for audit is NOT based on CHEATING, although admittedly it may
sometimes be based on the perception that there is a POSSIBILITY of
cheating.
Operating at a loss with a home business can get you audited, even if you
are the least greedy, most altruistic saint.
Just checking the "use of home" box on the schedule C more than doubnles
your chance of being audited.
If you are creating a retail product, OR have significant expenses to
bring your workshop up to code, you ARE likely to operate at a loss for a
while, and ARE likely to get audited.
And those "low hanging fruit" are those
hobby businesses that are
pulling in $50K plus...
WRONG. operating at a loss of a $1K with a gross of ~$10K WHILE
developing a product can do it.
Will, son of a CPA
Then you are well aware that
preparation for an audit for somebody who is
not a good bookkeepper is major punishment, no matter how honest you are.
You know what is or isn't deductible. Howzbout the $35 per month that you
electric bill went up? Do you need to go through your home workshop to
get to the washing machine? Do you store any of your hobby materials in a
corner of your office? Do you let your kid play in a corner of your
office, or use your office computer(s) to play games?
You know all of the details about 1099 issuance. Do you file one for your
landlord for commercial property that you rent to avoid audits by working
out of home? Do you file one for the gardener that your commercial
landlord requires ($15 per week)? How about the commercial artist who
designs your ad? How about your CPA?
Who is or isn't an "employee"? How about that gardener?
If you do a tradeshow to advertise your product, which of those expenses
are deductible?
When I was audited for filing a schedule C, the auditor did want to make
multiple changes, in both directions, and ended up finding that I was due
back a few hundred more dollars. That was "declared a wash".
Cheating? NO.
Not having a CPA in the family to make your tax forms look nice.
--
Grumpy Ol' Fred cisin at xenosoft.com