The IRS has targeted self-employed (Schedule C) taxpayers for audits for good reason.  The IRS believes that many Schedule C filers do not report all of their income and/or overstate their business deductions.  In addition, many Schedule C filers do not keep accurate business records, with the result that the IRS disallows many deductions that would be defensible if they were properly recorded.  Schedule C taxpayers high on the list of IRS audit targets.

Here are nine (9) major considerations taxpayers should expect to be reviewed in this type of IRS Audit:

  1. How do you differentiate an independent contractor from an employee?
  2. Did you file a complete tax return?  Did you fill out all the lines on Schedule C?
  3. Do you have the required documentation on auto, meals, and entertainment deductions?
  4. Did you take the home office deduction? Do you comply with the rules regarding this deduction?
  5. Are you employing a spouse and other family members?
  6. Have you considered the hobby loss rules and their impact on the Schedule C filer?
  7. Can extending the filing date of you tax return reduce the chance of an IRS audit?
  8. Can you take advantage of the cash method of accounting?
  9. Did you contribute to a pension or individual retirement account (IRA)?
If you are the victim of an IRS audit, or to find out more, visit www.taxpayerresolution.com.