Many taxpayers make errors that can trigger audits. Key mistakes include:
- Using Schedule C for small business income, which lacks the double-entry accounting of partnerships or corporate returns.
- Incorrectly reporting home office or automobile expenses.
Strategies:
- Report small business income through an S corporation or partnership.
- Use accountable plans for home office expenses to avoid scrutiny.
- Ensure accurate and strategic reporting of expenses to minimize audit risks.
Special Considerations for Real Estate and Investments
- Be mindful of the type of entities you use for holding investments.
- Partnerships or LLCs often provide better protection and tax benefits compared to direct ownership or Schedule C/E reporting.
- Understand the implications of different depreciation methods and how they impact your tax liabilities and audit risks.
Want to learn more about how you can make way more money and pay way less in tax? Book a call with the team at TFW Advisors® today!