Three questions. Please know upfront, I am a tax novice and I will take no offense whatsoever if you dummy-down and simplify your answer.
I thought I had finished my taxes, but now see TurboTax is telling me I am at a high risk for audit so I want to clarify some things. I've NEVER been considered a high risk before. (I'm using Turbo Tax Home & Business.)
First question: I am self-employed and have unwittingly qualified for the Earned Income Tax Credit (which I didn't even know existed until I started researching things while working on my taxes). I re-examined the EITC qualifications. What is considered "investment income" in regards to the EITC stipulation that it must be under $3650? I took $3800 out of my Roth IRA in 2020; although I'm under 59 1/2 the money was part of funds I had contributed over five years ago. It is listed as a "J" on my 1099-R. Should I really still qualify for the EITC since it's over $3650? My Roth and traditional IRAs made more than $3650 last year, but I didn't take any of that money out and was not sent any other tax forms aside from the 1099-R. Is either scenario considered investment income?
Second question: One of the audit risks shown is that I only had only "one" income - my business - and it was at a loss. However, I had both LLC income and a W2. In 2020 my LLC's nominal income was actually considered a loss after entering my expenses, such as mileage, 20% of my cell phone bill and a couple other very small expenses. I also had a W2 for on-call work which was under $3000. (One of the risks listed: My expenses were more than my income, but that's not true if it included my W2 income.) Is the "one business" risk a TurboTax glitch? My W2 income shows in my 1040. Do I check other places in my forms to make sure I did things correctly?
Third question: I only saw one place to enter mileage. I entered mileage for both my LLC work and for my W2 on-call work all together. (I don't think W2 work would be considered a "commute" since it had me driving all over the place and only on a as-needed basis.) I was not reimbursed for any of these miles. Is that okay that these miles are all lumped together since I think it appears as a business loss on my Schedule C?
I'll throw in, I did receive PUA benefits last year, but from what I've read those don't count toward my EITC qualification.
MANY thanks in advance for your help!
