IRS Audits and the Self-Employed
According to the IRS, self-employed taxpayers are among the worst tax cheats. Unfortunately for the vast majority law-abiding self-employed taxpayers, this means that they, as a group, are more likely to be targeted for an IRS audit. Thankfully, there are steps that the self-employed can take to reduce their chances of being audited.
The two most important rules to follow are also the most basic: 1) report all of your income, and 2) don’t claim deductions for costs you didn’t incur. For those with employees, it is imperative to always make the necessary payroll tax deposits in a timely manner; late payments can incur significant penalties. For many self-employed business owners, it makes sense to use a bonded payroll tax service, which both files payroll tax returns and makes payroll tax deposits. A major benefit of these services is that, should any mistakes occur, the payroll service generally pays the penalty.
Businesses that deal primarily in cash face particularly high odds of being audited. While complying with federal reporting requirements—which mandate that cash transactions worth more than $10,000 be reported to the IRS—can help to ameliorate these chances, even such compliance won’t ensure avoidance of an IRS audit.
For help with your IRS audit contact San Francisco Tax Attorney Aubrey Hone today at 415.765.1754.