- Posted by Amy Spagnola
- On November 8, 2015
- 0 Comments
Tax time is often full of anxiety and dread. Will the IRS audit me? Will I owe the IRS money? Will the IRS send me to prison and will I become the next character for Orange is the New Black? Well, dramatics aside, if you’re wishing to avoid tax stress this year, hire a tax professional like those here at A.F. Gebauer and Co. in Longmont, Colorado. Our tax experts are here to help!
And if you’re wondering how to avoid a visit from the government–here are five things that might get you on the IRS radar:
1.) Vroom Vroom
Normal and daily trips to work (i.e. your commute) won’t count as a deduction, but customer visits or client meetings away from your normal workplace can be claimed. Be sure to keep careful
documentation (no piles of gas receipts smashed into the glove box) and make a logbook for business trips and add notes regarding mileage and reasons for the trip with pertinent details about any business transactions or payments.
2.) The Landlord Life
Rental properties can be a great investment opportunity. The chance to offset some of your own high earnings or successful business income with the maintenance and depreciation from a property sounds great; Acquiring more assets while avoiding more taxes? Yes, please. However, generally ‘passive losses’ can only offset ‘passive income’. With rental property, there is an exception, and individuals or couples can offset their tax bill with some rental losses. However, losses are capped at $25,000 per year, and phased out starting at $100,000 AGI, with no loss deductible if your AGI exceeds $150,000.
3.) Making It Rain
Earning too much money can put a big bulls eye on your back. An individual has about 1/100 chance of being audited but with an income exceeding $200,000 the odds sharply increase and become about 1/25. High rollers with an income of over a million can almost guarantee an audit within a few years, with 1 in 8 returns being selected.
4.) Income Oops
By law, businesses are required to report payments for services to individuals which amount $600 or greater during the year. Generally, businesses will report even lower amounts paid out, as it reduces their taxable income. If you are issued 1099s and don’t report the income(either by not receiving the 1099 or choosing to not report the income received on a 1099), you will likely receive a phone call from the IRS, as you are a quick and easy audit.
5.) Office Space
A sizable deduction if done correctly, the home office can allow a taxpayer who works remotely or telecommutes to deduct a portion of rent, mortgage payments, insurance, property taxes, as well as utilities off their taxes. What’s the catch? The home office space must be used exclusively for business (i.e. not as a part-time gym, toy room and craft center).