Tax Preparation: Will I Be Audited by the IRS?

The IRS audits a small percentage of tax returns every year. In 2017, the agency audited 1 million, or 0.5 percent, of all returns the IRS received. That’s a very small percentage, but there are cases where an income tax return could trigger an audit by the IRS. LongSchaefer’s tax preparation experts discuss whether or not you’ll be audited by the IRS.

Not Reporting All Income

Unreported income occurs when the IRS receives forms, but you fail to report the income with your return. For example, the IRS gets a W-2 form for wages from three employers as well as a 1099-INT form that outlines the interest you received from an investment account. You forget to report the interest income, and you failed to include some tip income on a W-2 form when you worked as a server. The higher the income you fail to report, the greater the likelihood you could be audited.

Large Increases in Income or High Income

The odds of having an IRS audit increase as your income goes up. This is particularly true of business income. Around 1.4% of businesses with income from $200,000 to $1 million were audited in 2018. That number rose to 3.2% when businesses earned an income of $1 million or more. Tax preparation and accounting experts can help you avoid an IRS audit by filing accurate returns. These firms can also assist you through the audit process should the IRS send you an audit letter.

Excessive Business Tax Deductions

The IRS tracks typical business expenses generated by certain industries. Travel expenses 20% above the norm might get a second look from the agency. You should keep accurate records for vehicle-related expenses, especially if you take a company car home for personal use. Excessive meal allowances are also a red flag for the IRS. Accurate tax preparation is one key to avoiding a potential IRS audit.

Foreign Bank Accounts

The IRS has strict rules for reporting foreign assets, particularly bank accounts. The agency requires you to fill out Form 8938 if you own $50,000 or more in foreign assets. Admitting you have foreign assets over $50,000 may actually trigger an audit because the IRS feels you may be trying to shelter certain income from taxation. Unfortunately, hiding these assets from your return may also cause an audit. We’ll walk you through what to do about foreign assets during your tax preparation.

Help Avoid IRS Red Flags at LongSchaefer

No one is guaranteed to avoid an IRS audit. They choose who to audit based on many factors. However, proper and accurate tax preparation can reduce the likelihood you’ll face an audit. Contact LongSchaefer or call (513) 245-0300 for more details about our services. 

Tax Preparation: Your Taxes Are Late. What Can You Do Now?

You didn’t realize the income tax deadline was upon you. Your individual or corporation taxes are past due! What can you do? LongSchaefer, Cincinnati’s tax preparation experts, explain the IRS process when your taxes are late.

First, File an Extension Form

The IRS gives you extensions to file your income tax returns for up to six months. Individuals and some businesses must file Form 4868, while certain businesses submit Form 7004. These forms are relatively simple. All you need is to fill out basic information and the reason why you’re filing taxes late. Tax preparation can continue as normal.

Get Ready for Tax Preparation

Once you file your extension forms, it’s time to get ready for tax preparation. Gather as many financial documents as you can, including bank statements, income statements, invoices and receipts, expense reports and receipts for business purchases, payroll statements, mileage records, and anything else you can think of. The information you collect depends on whether you’re an individual or business and how many different types of income you receive. If you received any IRS forms in the mail, gather those as well.

Figure Out How You’re Going to File Taxes

Tax preparation software makes filing taxes through the IRS extremely easy. Simple tax software is inexpensive or even free if your income is low enough. More complicated tax situations may have software packages that cost $100 to $150. Consider hiring an accountant if you have a complex tax situation, own a business, or need help making sense of this year’s tax law changes.

Tax Preparation Before Your New Deadline

The sooner you gather all of your financial information, the better. Tax preparation experts need time to go through your financial statements and records to determine what forms to fill out and how to handle your taxes. A lot of our processes are automated, so if you have online or electronic records, those are the best things for us to use. Bank statements, e-forms, and electronic receipts are fantastic tools that make our jobs easier!

LongSchaefer: Expert, Efficient Tax Preparation

Talk to LongSchaefer about filing your income tax returns. Our tax preparation experts promise efficient income tax filing based on your situation and the complexity of your financial records. Contact LongSchaefer or call (513) 245-0300 for more information.

Five Reasons Why Hiring an Accountant Makes Sense for Tax Time

Do you dread doing your taxes? It’s an annual ritual we all have to deal with, whether you worked one job with a single W-2 or owned 50 rental properties that all generated revenue for your business. In today’s blog from LongSchaefer, your tax preparation expert based in Cincinnati, we explain five reasons why hiring an accountant makes sense for tax time.

Complexity

Take just one look at a tax form and the accompanying instructions. They’re complicated, to say the least. We totally understand: Tax laws are a beast. A professional tax preparation company like LongSchaefer knows how to navigate complex tax codes, identify specific tax situations, and submit the correct forms to the IRS. Let us do the hard work for you!

No Time

Your time is valuable. You may find that it’s more economical to have a professional tax preparation company do your taxes for you. If you can’t find time to delve into your taxes because you would lose income, then hiring a firm like LongSchaefer makes perfect sense. You could discover that you simply don’t have time to do your taxes, and you’re expecting a big refund. Investing in a tax accountant pays off because you could get your refund faster without spending an enormous amount of time navigating tax changes from the previous year.

Business or Self-Employed

If you own a business or you are self-employed, tax time can be especially complicated. If you don’t have income taxes withheld from a regular paycheck, you’re liable for paying taxes to the IRS. However, there are tax advantages to owning your own business or being self-employed that you don’t want to overlook. A tax preparation company like LongSchaefer helps you optimize your tax refund by finding tax deductions, applying tax credits, and handling the IRS.

Kids Entering College

Your son or daughter is about to enter college, which means everyone must fill out the Free Application for Federal Student Aid (FAFSA) when trying to get financial aid. You might find out that your child has assets or income that could reduce the amount of financial assistance your son daughter qualifies for. LongSchaefer’s tax preparation professionals show you what you can do to file an accurate tax return ahead of helping your child apply for college financial aid. 

Multiple Income Streams

Perhaps you’ve had a regular job for 20 years as a career. You supplement that income by owning three rental properties. You also have thousands of dollars invested across savings accounts, bonds, mutual funds, and stocks. Each of these types of income is taxed differently. If you fail to identify all of your types of income, it could delay your return or you could pay penalties. Tax preparation from LongSchaefer identifies various income streams and understands how they affect your return so that you can file accurately.

Tax Preparation by LongSchaefer

LongSchaefer, one of the top Cincinnati accounting firms, specializes in tax preparation for individuals and businesses. We file accurate tax returns you can rely on, especially if you don’t have the time or you don’t understand the IRS tax code for your situation. Contact LongSchaefer or call (513) 245-0300 for more details.

May 2020 COVID-19 Update

In order to comply with the Ohio Health Department Order & CDC social distancing recommendations, our offices are closed until further notice. Rest assured that our established protocols and available technology will allow us to provide the same level of service and quality you expect from LongSchaefer during this time.

The SBA has announced details of how it’s helping small businesses through the Coronavirus outbreak. The IRS is sending payments to families affected by this crisis. 

Please click on our Coronavirus information pages for more information.