Tag Archive for: Audit

Tax Return Red Flags for Schedule C Filers

In the complex landscape of business taxes, Schedule C expenses and entity optimization hold significant weight. Proper documentation and reconciliation, guided by a trusted accounting professional, are more than just best practices – they are vital for audit prevention and ensuring a successful financial trajectory.

Why Is This So Important?

  1. Audit Triggers for Schedule C Filers: The IRS closely examines Schedule C filers to ensure the accuracy of reported income and deductions.

Specific scenarios increase the likelihood of triggering an audit:

  • Income exceeding $100,000
  • Taking disproportionately large deductions to offset income
  • Multiple-year hobby loss write-offs
  • Claiming 100% business use of a vehicle
  • Large deductions for meals, travel, and entertainment
  • Home office deductions
  • Claiming rental losses
  • Opting for the Research and Development Credit
  • Receipt of significant cash income (especially without filing Form 8300 for amounts over $10,000)
  1. Entity Optimization: Choosing the right business entity affects your liability and how much you pay in taxes. For instance, an LLC might benefit a sole proprietor more than remaining a Schedule C filer. Making the right decision in entity selection can lead to tax savings.

The Role of Accounting Professionals

  1. Documentation: Accurate and timely documentation of expenses ensures that you take advantage of all legitimate deductions, reducing the chance of errors that might trigger an audit.
  2. Reconciliation: Regular reconciliation of business accounts helps in early detection of discrepancies, ensuring that income and expenses align with bank and credit card statements.
  3. Guidance: Professionals can offer advice on structuring your business, potential deductions, and best practices to remain compliant with IRS regulations.
  4. Audit Support: In the unlikely event of an audit, having a professional by your side provides a sense of security. They can guide you through the process, answer questions, and ensure all paperwork is in order.

Proper handling of Schedule C expenses and entity optimization is not just about keeping the IRS at bay; it’s about ensuring that your business is on a secure and profitable path. Leveraging the expertise of an accounting professional can be a game-changer for your business’s financial health and success.

Stay informed, stay compliant, and remember – we’re here to help.

Important Update: IRS Focus on High-Net-Worth Individuals and Pass-Throughs

We wanted to bring your attention to a recent development that may be of interest to you as a high-net-worth individual or a pass-through entity.

The IRS has shifted its focus towards high-net-worth individuals and pass-through entities, aiming to enhance compliance and enforcement in this area. This change in focus may have implications for your tax planning and financial strategies.

I want to inform you that I currently have an ongoing audit case with the IRS concerning high-net-worth individuals and pass-through entities. Through this experience, I’ve observed that the IRS is still in the process of fine-tuning their approach to auditing these cases. Their primary focus continues to be on small businesses and Schedule C filers, particularly concerning tax compliance and deductions categories.

For those of you who operate Schedule C businesses, this could be an opportune time to consider revisiting your business structure. Making informed choices about your business structure can help you navigate these evolving IRS priorities and ensure compliance while optimizing your tax position.

To gain a deeper understanding of the IRS’s new focus and its potential implications, we encourage you to read the recent IRS announcement available on the following link.


As always, we are here to assist you in navigating any changes or challenges that may arise as a result of this shift in IRS priorities. Please feel free to reach out to us if you have any questions or concerns or if you would like to discuss how this development might affect your specific financial circumstances.

We remain committed to providing you with expert guidance and support to help you achieve your financial goals and maintain compliance with tax regulations.

Thank you for entrusting us with your financial needs, and we look forward to assisting you further.

Important IRS Enforcement Update – Let’s stay compliant together!

September is off to a strong start for us and as usual, we are staying busy with the upcoming tax deadline!

We wanted to bring to your attention a recent announcement from the IRS regarding their updated enforcement priorities. This information is crucial for all taxpayers, and we’re here to assist you in navigating these changes.

The IRS has outlined a “sweeping” shift in their enforcement focus, which includes the following key areas:

  1. Increased Audits: High-net worth taxpayers, large partnerships, and those with suspected nonreporting foreign bank accounts can expect heightened audit scrutiny.
  2. Aggressive Collection: The IRS is stepping up collection efforts against high-income individuals who owe tax debts.
  3. Artificial Intelligence: The use of Artificial Intelligence (AI) will play a significant role in detecting non-compliance.
  4. Digital Asset Reporting: The IRS continues to focus on digital asset reporting non-compliance, making it vital for those involved in the digital asset space to stay compliant.
  5. 1099 Fraud: The construction sector is under increased scrutiny for 1099 fraud, emphasizing the importance of accurate reporting.
  6. FBAR Violations: The IRS will continue to scrutinize Foreign Bank and Financial Accounts (FBAR) violations.

You can read the full IRS News Release here: IRS News Release Link.

In light of these changes, we strongly recommend that you work closely with us to ensure your tax compliance and reporting are up to date. Our team is well-equipped to help you navigate these evolving tax landscapes, and we’re here to provide guidance, answer questions, and assist you in staying compliant.

Our commitment to you is to make this process as smooth and stress-free as possible. Should you have any concerns or questions about your tax situation, please do not hesitate to reach out to us. We are here to support you and ensure that you remain in good standing with the IRS.

Thank you for entrusting us with your tax and financial needs. We look forward to working together to ensure your continued compliance and financial success.