Tax season alone, whether you’re doing the paperwork for a business or for yourself, can bring a long of anxiety. During this time you collect all your paperwork, sort through the numbers and try to figure what your financial picture looked like last year. This can be extremely time-consuming and tedious.
Once you’ve got all your ducks in a row, you sit down to do your taxes, penciling in all the numbers and calculating all the figures of your financial life. Although we do our best to do everything accurately, there are times when we, unfortunately, make mistakes.
The big question is, what kind of mistakes can lead to an audit? If you work for yourself, you have to make sure you do not report too many losses on your Schedule C. Make sure that you do not claim personal expenses as business losses. At the same time, consider what you claim as a business expense. Were the tools you bought for a certain work project really necessary? Purchases that you include must be necessary for that certain line of work and they must be ordinary.
Also, consider how you use the home office deduction. Do you have an actual office in your home that you specifically use for the purpose of business or do you just work while sitting on your couch in the living room?
Really think about the numbers. Filing taxes with incorrect figures is a big no-no. If your paperwork has a lot of round numbers, the IRS might question their accuracy. If you plan to round your numbers, make sure it’s to the nearest dollar, not the nearest hundred.
Finally, don’t forget about all the income you made for the year. If your income produced a Form 1099, the government is already aware of your income. Make sure you don’t accidentally forget about all the income you have made during the year.