Question


James

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.

1 month ago - 4 answers

Best Answer

Chosen by Asker

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 www ... 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

by garyg7

1 month ago

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Other Answers

Probably very little chance. With $8000 in SE income, you will owe $1130. Keep in mind the IRS tends to think you under reported your income and over reported your expenses. The tax preparer (an Enrolled Agent is often better than a CPA and cheaper) will get you on the right track. They'll be able to judge if your expenses are out of line.

by the tax lady- 1 month ago

Overall, the chances are about one percent. You don't sound very interesting. If you expenses are less than $5,000, file Schedule C-EZ, not the bigger Schedule C. In my experience, returns the audited don't pass the smell test when you look at them. If yours looks OK, it will probably be fine.

by Max Hoopla- 1 month ago

some people get audited some don't, no one ever knows when, so just keep all your receipts with a copy of your tax return in a safe place, just in case. As long as you have proof for anything you report on your tax return or schedules, you should not have problem. Good luck!

by Ms. Angel..- 1 month ago