---

@billmanduca wrote:

Do I/should I report the inheritance money I used to help fund the business and business income? Will this mean the inheritance money is subject to taxes when used this way?

---

No, a cash inheritance is not taxable (or reportable) at the federal level regardless of how the cash is utilized or spent.

Any suggestions on how to reduce my risk of audit because the expenses being higher than reported income?

You cannot report the cash inheritance anywhere on an income tax return even if you wanted to do so... that would be illegal.   

The "meter" cannot predict who will or will not be audited and some returns are even pulled randomly.  

Thus  the audit meter is just  a marketing ploy to get you to buy the audit protection package. 

If you are filing a true and accurate return and have good records of all your income and expenses to support your entries on the return   then you should  have no fear of being audited.  Just like in school ... if you have all the answers correct on a test you don't need to fear the teacher grading the paper.  

Thank you!