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Ron's IRS Audit-Survival Tips
In our January Tax Talk, Ron Lykins,
Inc. CPAs warned about the feverish increase in IRS tax audits. Our tax
advisors have noticed a disturbing trend in recent audits that reinforces
the importance of maintaining accurate records. We disagree with many
deductions the IRS is routinely disallowing.
Ron Lykins, Inc. CPAs has a successful track record of appealing IRS audit
decisions and the key to success is the accuracy of the client's records
coupled with our knowledge and expertise of dealing with the IRS. Three
years ago, a client was audited and the IRS maintained the client owed over
$20,000 of taxes and over $3,000 in penalties. Because the client maintained
good records, Ron Lykins, Inc. was able to appeal the decision and the case
was settled this year for less than $750.
Ron's IRS Audit-Survival Tips
1. Charitable Contributions
The IRS appears to be targeting charitable contributions. Make certain that
you have verification for ALL of your cash contributions and good records
for non-cash contributions.
Click here
for the 2010 Charitable Donations Valuation Guide or contact your tax
advisor for a copy.
2. Misc. Deductions and Employee Business Expenses
For Misc. Deductions and Employee Business Expenses to be deductible they
must be required by your employer to maintain your job. You need to verify
that the expenses are business, rather than personal; and, you must keep a
record of business miles and a log for meals and lodging. In addition, any
reimbursements you receive will offset the deductions, so be sure to keep
accurate records of these as well.
2106 Employee Business Expenses include business miles, meals,
entertainment, supplies, etc. Please let us know if you have any questions
about your business expenses.
Click here for a Business
Entertainment Log.
Click here
for a Business Travel Log.
3. Schedule C Self-Employment Income and Schedule E Rental Income
The rules for employee business expenses also apply to Schedule C
self-employment income and Schedule E rental income. It is vitally important
that you separate business expenses from personal expenses. Ron Lykins, Inc.
recommends the following:
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Maintain separate business
accounts for checking and savings, as well as dedicated business
credit cards. If you pay for a business expense out of a personal
checking account, the IRS will assume it is personal and the appeal
will be an up-hill battle.
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Maintain your records in a
business-like fashion. The best way to do this is to use a system
like Quicken or retain a bookkeeper to maintain a Profit and Loss
Statement and a Balance Sheet.
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Make certain you have a profit
motive for the business. Be prepared to be challenged by the IRS if
you do not have a profit for two out of five years.
The professionals at Ron Lykins, Inc.
CPAs prepare every tax return based upon the expectation that it could be
audited. By maintaining excellent records, even better than you have in the
past, we will use our tax knowledge and experience to help you keep more of
your hard-earned money.
Call Ron Lykins, Inc. CPAs today if you have any
questions or if you want a tax advisor to review your record-keeping system.
614-891-1041
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