IRS Red Flags

So, for many people IRS tax problem can become a frightening but a very real issue. If you are scared about the potential of an IRS problem becoming a reality, it helps to know what kind of events the IRS see as a potential red flag. If you are working with an accountant they can tell you what you need to avoid yourself specifically, but many solutions exist that you can make the most of.

The most common forms of red flag, though, are described down below.

Earning too Much

It might seem harsh, but a common IRS flag comes from your earning potential. Are you earning a fair chunk of money? Then expect the IRS to be in touch. They are likely to view your earning potential as an issue if you are earning more than $200,000. That might sound harsh, but the reason is simple – the more you make, the more complex taxation becomes. The more complex it is, the more likely you are to try and find ‘solutions’ to these issues.

They don’t pick on high earners but they definitely scrutinize accounts more – and rightly so, to an extent. The more that you make the higher the chance is that you are looking at schemes.

Weird Expenses

Many people struggle when it comes to making their business expenses look credible, or even slightly believable. Why? Because, it’s very easy to see how easy it is to blend it all together. Anything more than 20% over the usual business tax deduction limit is bound to get a few glances from one member of staff at the IRS. Put simply, they aren’t huge fans of people trying to claim holidays, hobbies and vehicles as a business expense when they clearly aren’t.

The IRS can be exceptionally choosy about who it works with and who it mixes with professionally. This can obviously be a bit of a problem, and will usually lead to at least some form of debate once in your business life. However, you are likely to find that meals and entertainment when used to often – although usually allowable – can become questionable.

Be smart about this – don’t exceed the occupational norm and definitely don’t crowbar in personal expenses to your business accounts.

Income Silence

Another silly mistake that too many make is trying to avoid listing all of their work. Let’s say that you operate with a business but you also do some freelance work in the same industry on the side. People try and hide the freelance work, but since you need to fill in a 1099 Form anyway, you will get caught.

It’s going to show up a major discrepancy on your accounts, and will be a major red flag.

If you want to avoid these problems, then you need to hire a good CPA. They can get involved and find an easy, effective solution to your tax issues that makes sense, is affordable, and guarantees that your business runs itself ethically and affordably.