As a Sole Proprietor, you have arguably the most stressful and annoying of IRS taxation jobs. You can find that it’s tough to get everything put down on paper the way that it should, and what you do for a living can sound quite iffy to the government. Those who work online, for example, can find their employment being questioned and especially where your income is coming from/what you got paid for.

To help you make sure you can avoid these problems, you should hire a CPA to help you manage this challenging part of tax. We recommend that you try and hire help who can help you look out for the following IRS red flags:

  • Excessive ‘tips’ is a common game that is played and can be a problem. Tips and cash payments are a common part of sole proprietary life, but that does not mean you can just avoid putting any of it through.
  • Those who tend to take this kind of income will be more likely to be audited by the government. Be as meticulous as you can and it can avoid you having too many questions that you cannot answer adequately enough.
  • Also, be sure that your deductions are fair and honest. If you try to deduct too much, you can expect a few stern questions about what is going on. Never try and put a personal expense through with your business expense – even just one or two of these can be enough to get you in the spotlight.
  • While this might seem insulting, you can also get audited fi the IRS feels like your income is too high for what you do. They will look at the national median for what you do for a living, and if you are overly above or below that they might want to know why that is the case. Don’t get insulted by this – just be honest about what you earn. If you can provide evidence for everything, then you have nothing to fear.
  • Another rather insulting part is if your business keeps making losses. After a few years, you’ll be expected to be profitable – if that is not the case, the IRS will wonder what you are doing wrong and will likely want to talk to you.

Whatever you do, you should always look to bring in some aid in the form of a CPA. They can help you to decipher where – and when – you are going wrong to better improve your business performance.