Red flag #1: Filing a Schedule C
Why is this a red flag? A Schedule C shows you aren’t interested in operating like a real business. The IRS knows this and may look at your return more critically.
Many taxpayers use a Schedule C, or IRS Form 1040, to report income or loss from a business or profession they practiced as a sole proprietor. However, those serious about operating as a business elect to be treated as a corporation for tax purposes. If you are serious about your business and you’re still using a Schedule C, it’s time to ask your tax advisor why.
Red flag #2: Doing something on the IRS’s “Dirty Dozen” list
Every year, the IRS publishes a list of what it calls the Dirty Dozen — activities the IRS considers to be popular among tax scammers. Everything on this list isn’t necessarily illegal. There are legitimate tax credits on the list, for example, that the IRS says are often being claimed fraudulently. But the fact that the IRS considers it “dirty” means you need to be wise and tread carefully. Work closely with your tax advisor, and always make sure you have an advisor who isn’t afraid of the IRS.
Red flag #3: Sloppy accounting
Math or spelling errors. Missing or mismatched documentation. Deductions that don’t make sense. I see it all the time when I review past tax returns for new clients. And if I can tell your accounting is sloppy, so can the IRS.
Remember: It’s your money, not the government’s.
You work hard to earn your money, and you deserve to keep it. That’s why you need a great CPA with a proven system for permanently reducing — or even eliminating — your taxes. TFW Advisors® can help. Book a call today!