Filing your taxes is hard enough, but if you’re one of the unlucky few chosen to be audited by the Internal Revenue Service (IRS), you could find yourself struggling. Working with a local certified public accountant in Castro Valley, CA can help you avoid audits. Whether you avoid the triggers or are simply reassured that your accountant has done their best to ensure your return doesn’t raise any red flags, working with an accountant is your best bet.
Although many people can do their taxes on their own, they may not realize they’re more likely to be audited in these specific circumstances.
Not keeping business and personal expenses separate
If you plan to claim business expenses on your tax returns, make sure you keep accurate and separate records. The IRS has lists of “occupational norms” that, if you exceed them, may trigger an audit. As a general rule, you shouldn’t claim more than 20 percent over the norm unless you’re looking for an audit—or unless your tax returns and records are flawless. Working with a great CPA can help you remain confident and on the IRS’s good side.
Failing to report all of your income
If you have multiple sources of income, it can be difficult to keep track of them all. However, you can expect that the IRS is keeping tabs on your income. If you fail to report everything you earn, expect to be audited. They receive the same 1099 forms that you do. When you get your tax documents, make sure to keep them all in one place. This will ensure that you and your local certified public accountant in San Leandro, CA will report everything.
Not following the rules for foreign accounts
If you have a foreign bank account, you’ll need to make sure you fill out the appropriate forms. If you have more than $50,000 in foreign accounts, you or your accountant will need to fill out form 8938. Although the IRS didn’t always require account holders to report their assets in so much detail, they do now. The idea is that foreign account holders might be trying to hide their income in an offshore account, so the IRS often audits owners. As long as you openly report all your assets, you should be safe.
Earning more than $200,000
If you make more than $200,000 per year, you might be surprised to learn that your taxes are far more likely to be audited. Each year, the IRS audits about four percent of people making more than $200,000, while they only audit about one percent of those making under that threshold. The same goes for your business—the IRS audits those with over $10 million in assets at a rate of 17.6 percent. Last year alone, the IRS collected over $55.3 billion in enforcement revenue, so you’ll want to ensure that your recordkeeping and tax returns are flawless.
For help with your tax returns, work with a local certified public accountant in Hayward, CA. Menjivar & Company CPAs, Inc. can help when you call today.