The IRS Audit Blog

Posts Tagged ‘schedule c’

Question: 1099-MISC form and W-2?

I am doing my boyfriends taxes by printing the forms off the IRS.GOV website…do I include the wages from the 1099-MISC form on the 1040-EZ, or is the 1040_EZ only for W-2’s? On the 1099 the only amounts listed are under non-employee compensation.

Answer: You can’t use Form 1040-EZ. You MUST use Form 1040 plus Schedule C or C-EZ. If the net income on the Schedule C is $400 or more you also need to attach Schedule SE to calculate the self-employment tax.

IRS: More money for some deductions

People who do standard deductions will see more money in their tax returns this year.

Question: Do the odds you will be audited go up if you file your taxes late?

Haven’t filed for the first year I was self employed. I have heard that you are rarely audited the first time you file a schedule C income and most people file a loss the first year they report a Sch C. I know that can probably vary but what are my odds of being audited and how does the IRS determine who will be audited? Especially considering I’m filing late.

Answer: You’re fine. It doesn’t go up just because you file your return late. A very small percentage of people are actually selected for auditing/examination. One thing that can increase this chance is to report information that drastically differs from IRS records. Also, reporting information that is outside the “standards” might raise a red flag. The standards are what the average person within an income bracket might claim for various deductions.

Filing late in and of itself, does NOT increase your chances of an audit/exam.

4 things to take — and leave — when on vacation

Boarding passes, hotel key cards, miniature shampoo bottles, useless souvenirs — if you spend a lot of time traveling, you know “stuff” can weigh you down and clutter your life. Recreation – Shopping – Collecting – Glassware – Bottles

Question: Chances of being audited by the IRS?

I run a very small business from home that is prob going to make no more than 8,000 my first year. I just started it early this year and will be having a CPA handle everything for me (even if I can do it myself I’d rather have it done right for sure) but I’m a little freaked out about getting audited bcause a friend told me people filing Schedule C forms tend to get audited alot. I have good records of payments but my bank account is messy and I don’t want to have to deal with an audit. If I’m single, not claiming EIC (im not old enough), and have only about $300 of business expenses… What’re my chances of being audited? I’m stressing out thinking about it now.
Oh and I live in an apartment with a roommate and dont have any dependents or anything to claim on my personal 1040 return either.

Answer: The technically correct thing for you to do is to have a separate checking account for your business. Failing that, I highly recommend that you keep records showing which deposits are for business and which are gifts, other sources of income, etc. If you get paid cash, you must keep good records.

The audit rate on a Schedule C is close to five times higher than a tax return without one. Relax, the percentage still isn’t that high and the IRS looks at other factors. If the net $7,700 income is your only income, then you won’t have to pay federal income taxes. You will have to pay $1,088 in self employment tax. (I used the calculator at http://www.taxbrain.com/taxcalculator/default.asp to run the numbers.)

Talk to your CPA. He or she will likely give you at least half an hour of “free” time to discuss what you can do to improve your records and lower your taxes.

I hope this helps.
Gary

Signpost – A taxing decision

Every year millions of Americans deal with one of the certainties of life — taxes. Weber State University students make the decision to have their taxes prepared by a professional or prepare their taxes themselves using computer software.