The IRS Audit Blog

Posts Tagged ‘tax audit’

Frustration, questions swirl around DeSoto Council on Aging

A membership meeting set for Thursday could change the makeup of the Board of Directors.

Certified Public Accountants, Income Tax

Question: I have a home business- need tax advise what do i do???

I have an at home based business. that actually provides a beauty service. I sell no product. But I have a designated room in my home for this. i dont have a corp or llc or s corp. i just work from home doing my service., to be more specific i do eyebrow threading. its an alyernative to facial waxing. I want to know whats the best way to take advantage of deduction with this type of business. I also get alot of payment thru cash. si what should i do before tax time to get the greatest return and avoid red flags and audits.
I dont own my home i rent, i have a designated room for this purpose, & I am not in india i am in the US. usually my husband and i do joint filling with him as the sole bread winner, Iam stay at home mom. But I started this, side work and it has turned out very well for me. so hearing about all the benifits of home based business, i wanted to see what i could do. would selling product be a way to legitmize my earnnings

Answer: You could write off a portion of your home for business, but this is the #1 red flag for an IRS audit for self employed people, so be sure that EVERYTHING you are deducting for this purpose has proof and receipts to justify this deduction. The room has to be used SOLELY for your business. I’m not an expert but we ran a contracting business through our home for over 10 years. We never used the home deduction just because it creates a nightmare when you sell your house (tax recapture and all that junk) that we didn’t want to deal with & we had enough other expenses that we didn’t need the hassle of that one. Of course, since you rent, it’s different. I’m not sure if this is legal (CHECK W/THE IRS FIRST) but you might be able to write out a separate check for that portion of your home (convert your square footage into a percentage) and use that as a rent expense for your business instead? Again – doublecheck. Basically, if all your payments are coming in as cash, and no one is claiming you as a deduction (sending you a 1099 form at the end of the year) then you really don’t have to report it as income (((dodging eggs from IRS))). If your income & expenses don’t justify all the headache of filing a schedule C, you may want to reconsider legitimizing it unless you plan to expand into a store front or purchase a major amount of equipment. You could show a loss this way and reduce the amount of tax you would normally pay between this income and your husband’s income, but that can only be done a couple of times before flagging an audit. Not sure what state you’re in, but in CA in order to sell products you have to collect sales tax and report to the state every quarter – it’s a major pain!

Report finds controlling shareholders in India have too much power, situation ripe for abuse

MUMBAI, India – One year after the founder of Satyam Computer Services made an astonishing confession to the largest fraud in Indian corporate history, many say that what really sets R. Ramalinga Raju apart is not his malfeasance, but the fact that he got caught.

KPMG | Global Internship | India | Living Arrangements

Question: Chartered Accountant—–Math?

I am currently in Gr.11, in Ontario, Canada. I want to be a CA and am interested in business, but i totally hate math. I am taking data management and advanced functions in Gr.12 though. I want to know if math is required in university in order to be a chartered accountant. I think only economics, tax, auditing, accounting, etc are required. Please tell me if math is required, and how many math courses are required in university.

Answer: It depends on your university. At my school (Alberta, Canada), you actually have to do a year in the faculty of arts before you can apply for the business program. In that year you need to get some prerequisite courses (Stats, Calculus, Econ 101or102, English 100) and then you take whatever else you want to boost your GPA for application into the business program.

I’m numerically challenged too. But I conquered Calculus, and I’ve fallen in love with Econometrics (economics, stats and calculus – all in one sexy bundle). Unfortunately, at university Calculus and Statistics are required for most of the courses (except those in the faculty of science…they don’t need calculus).

Economics, tax, auditing and accounting are all math based. In 100 level economics, you still need to understand how to read the slope of a line and determine the intersects. You’ll need calculus to know how to find the derivative of a formula so you can calculate revenue and profits for a firm. All of these are math based, but it’s not high school math. It’s applied. I’m doing a 300 level tax course, and it’s math.

Even going to the grocery store is math based…but that doesn’t stop you from buying foods.

I’m in third year of economics, I only needed introductory calculus and stats. I’m not going to lie, these were a nightmare. They take a lot of work. I ended up getting a tutor for calculus (and seeing my prof for my weekly “omg I’m going to fail! Save me!!”). But, seriously, I don’t get math and I survived. I’m the kid who still has to look at my fingers to add numbers…but I can do calculus and statistics quite competently.

Everyone is in the same boat as you. If you want to become a chartered accountant, you still have to go through with math. However, plan your schedule so that you have time to focus on calculus. Take calculus one semester and then some easier courses like english and some arts options.

My school offers an applied stats and harder stats. The applied one gives you problems that you do. The harder one gives you theory and less problems. There’s also an applied calculus and a harder one. The applied is less theory more solving things. (I was really keen and wanted to show off…so I took the non-applied versions of both…I took stats and calculus in my first semester at university…that was the worst semester of my life)

Deloitte Canada’s 2010 TMT Predictions Reveal: Good Enough Becomes Better Than Perfect

TORONTO, ONTARIO–(Marketwire – 01/19/10) – As economies emerge from the global recession, the technology, media and telecommunications (TMT) sectors continue to evolve at a rapid pace and will have strategic implications for TMT companies, Canadian businesses and consumers. Today Deloitte unveiled its 2010 global TMT Predictions reports and launched its cross-country road show presentation …

Tax Audit Revenue Canada

Question: IRS Tax audit penalty on ebay transactions.?

My husband filed tax as married jointly in 2008. I was selling things on ebay off and on, those were new game consoles. I made about $500 profit. We did not consider that that was also an income. he filed my income as ‘no income’ unknowingly. now we got a letter from irs for tax audit. they have given penalty for $4000. please advice what to do?

Answer: First off, IRS does not work that fast. Look carefully at the year in question. It is more likely to be 2007.

Next, it is also unlikely that you have received an “Invitation” to an audit, ie “come on down and prove your deductions”. More likely, you received a form CP-2000 (look at the top right corner of the form), which is a computer generated form from the Automated Under Reporter Program. It will tell you that someone (Presumably eBay) reported that you received income and that it was not reported on your tax return.

That part is probably correct. However, it is not the bottom line because you incurred expenses in creating that income. Once the correct information is in their hands, they will re-figure tax and penalties based on the $500 of profit.

Now, you can try to fix it yourself but that is what created the problem. To put this to bed with the first response and pevent a back and forth of nastygrams from IRS and replies, I cannot urge you strongly enough to spend a couple hundred bucks and engage an Enrolled Agent. Look in the yellow pages under “Tax Preparers” for people with “EA” after their name.

City, feds end feud over cash for Metro

Fort Wayne has settled its dispute with the federal government, ensuring the local Metropolitan Human Relations Commission won’t lose a large chunk of its revenue. An internal city audit released Friday reveals steps the city took to comply with federal accounting rules.

EXCHANGES #440 15 USC CHAPTER 2B – SECURITIES EXCHANGES