Do you have a Successful home based business? Did you know that only 1% of people with an income under $200K were audited last year, while 12 % of millionaires were?
Having a home based business can save you money come tax time, but you had better be prepared just in case of a tax audit.
Here are 5 Red Flags that can trigger a tax audit
1. Report The Right Income
Don’t go thinking that IRS doesn’t know what you make, they do. Unless you were paid cash, you will need to report all of the income that you make. Most likely you will receive a 1099.or a similar document.
2. Rounding Numbers
It is perfectly OK to round the amounts .01-.49, rounded down to 0. As well as .50-.99 can be rounded up to the nearest $1. There is no other way this can be done. You don’t want anything to look suspicious; too many deductions at 25, 50, and 75,100 will more than likely put up a red flag.
3. Charitable Contributions
Yes, charitable contributions are deductable, just don’t go overboard and say you donated when you didn’t. Red flags will go up if you are donating too much of your income. Keep it real, if you are going to make a donation, make it and claim it otherwise, don’t claim it.
4. Mistakes On You Return
Make sure that you have all the right figures written down and all with receipts. The IRS will probably not penalize you if you are off just a little bit, but if it is a huge amount, you had better be prepared for a fine. Always make sure to proofread everything a few times if necessary.
5. Travel & Entertainment Expense’s
Did you know that 50 % of your home based business travel and entertainment are deductable? Even if you take a family vacation just talks to someone about your business and it is deductable. Once again make sure you have all of the receipts just in case there is a tax audit. If you start entertaining or vacationing too much this could raise a red flag
6. Your Home Office
If you have a separate room in your house that you use for your home based business, you can take this space as a deduction. But don’t go overboard here, use the actual footage of the room, when you fill out your taxes, Remember if you do get audited you will be the one trying to explain the size of this room to them.
Of course I am not a tax expert, but these are tax deductions that I do use for my home based business, there are a few more so be sure to talk to your accountant, tax professional or do a search online to see what other deductions you can take.
I do recommend getting yourself a journal just for your tax purposes and write everything in it with dates and times. Make sure you keep all receipts and write on them as you write them down and put them in an envelope attached to this journal.
Open yourself a separate bank account for your home based business, as well as a business credit card will help you keep track of your expenses as well as your earning.
If you have been thinking of starting a home based business, or already have one and are not getting the kind of results you know you deserve. I would like to invite you get registered for this Free Webinar.
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