Home Office Deductions

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Most business owners would say there is one thing they fear and try to avoid at all cost - a tax audit! Many live in fear of the unknown, wondering if their actions or accounting can trigger a visit from the IRS.

Audits are a normal part of the operations of our government designed to verify that your reported income and expenses are accurate. Even if you are reporting your finances accurately, you may still be a candidate for an audit because there are specific triggers that IRS uses to red-flag for possible non-compliance. By knowing what these triggers are, business owners can be better prepared if they get that dreaded inquiry from the IRS.

Our team of experts have compiled the most common triggers which are listed below:
1. Showing …show more content…
Home Office Deductions
Because home office deductions can be so easily abused, last year, the IRS simplified how small business owners can calculate the deduction. But to take this deduction you’ll need to satisfy numerous criteria. This deduction is a big red flag so make sure you’re satisfying every requirement, one such that the home office area be used exclusively for your business.

5. Claiming Business Losses Every Year
Business losses are part of the small business world. The first few years are tough and sometimes you’ll go through a rough period after enjoying profitable years. However, if you are constantly claiming losses, year after year, you’ll be on the IRS’s radar. They might assume you’re taking deductions you’re not entitled to or under-reporting your income.

6. Filing a Schedule C
Most small businesses report their income and expenses on a Schedule C. This form does increase your odds of being audited but don’t let the fear of an audit prevent you from filing this form. One way to avoid filing this form is to have your business setup as a corporation. This can have its own set of issues but you won’t be needing to file this form anymore.

7. Excessive Entertainment or Charitable …show more content…
Claiming Your Vehicle As 100 Percent Business Use
Most people get confused when it comes to properly deducting your auto expenses. Basically there are two ways to do it. The choice is based on which one gives you a higher deduction. You can use the IRS standard mileage deduction or the actual expense. You can’t deduct both of them. Finally, if you claim 100% deduction of your automobile or you’ll need to have all records on hand. This deduction is scrutinized quite a bit
When deducting for business use of a car, you’ll have to choose between the IRS standard mileage rate and actual expenses. Deducting both of these on your tax return will bring the IRS knocking. In addition, if you claim 100 percent business use on the depreciation form for your vehicle, you’ll need precise records that include mileage logs, dates, and the purpose of every
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