So You Wish To Be Self-employed?

If you're self-employed, the IRS has already targeted you as an audit candidate. This is due to the fact that self-employed individuals are prone to cheating on taxes. Filing fraudulent tax returns are simple with the lack of W-2s and payments made in cash. The IRS' Small Business/Self-employed division has the most staff. You have a high chance of being audited, regardless if you run an honest living and pay your taxes promptly. Without knowing it, you have IRS issues.

If you are being audited, the IRS will require information regarding:

• Workers classified not as employees but independence contractors
• If you paid proper payroll tax deposits
• All cash transactions were declared
• If you have large claims for business entertainment expenses
• If you have written off car expenses for travel expenses that weren't business-related
• If your lifestyle exceeds the sum of self-employment income you declared
• Personal living expenses reported as home office or business expenses
• If the business�s sales and receipts were declared

As you can tell, it is vital to file records. You'll have all the supporting documentation if an audit happens.

These tips will minimize your risk of an audit:

• Don't commit math errors because multiple will encourage the IRS to investigate you.
• Do not fail to sign your tax return. If you forget to do this, what else have you forgotten to accomplish?
• Donations have to be reported using the fair market value and have to be verified by an appraiser.
• The IRS can investigate your accounts, so do not underreport your income.
• Cash transactions shouldn't be hidden. Accomplish IRS Form 8300 for cash transactions over $10,000 15 days after the transactions.
• Do not overestimate home office deductions. If the room your home office is in is utilized only for that intent, you may deduct the expense. Keep good records on the fraction of the utilities and insurance required to keep that room functioning as a home office.
• Payroll tax payments should not be failed. If these taxes aren't settled, you're considered to be borrowing funds from the U.S. Government illegally.
• Discrepancies on your income should be avoided. This means your income needs to fit your lifestyle.

Some other factors for the IRS to audit you:

• income growth
• a partnership
• lifestyle improvement
• a trust, or tax shelter investments
• hiring family members
• hiring employees vs. independent contractors

If you keep accurate, organized records and settle your taxes on time, you will convince the IRS that you run an honest living when you are audited. The IRS may audit you for three years after you file a return, so keep your records for at least 3 years.

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Originally posted 2008-01-10 04:32:01. Republished by Blog Post Promoter

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