Freelancers enjoy the freedom of reporting income and expenses while employees do not have that freedom. As IRS has determined, freelancers are the ones that try to underreport the income or over state expenses to avoid paying taxes. Here are some things a freelancer can do to reduce the chances of getting an audit:
- One of the most common red flags for auditors – erroneous data entry – is also one of the most preventable. It seems simple enough to follow the advice to “double-check your return,” but surprisingly, people are often too careless regarding their taxes.
- Make sure only to write off the portion of your home used exclusively for work. If the space is used for anything other than work at any time, it can't be deducted as a home office.
- Make sure you report all 1099s correctly on the return since they are reported to the IRS.
- To reduce your chances of being targeted, take care to report only those deductions you can back up with receipts or other relevant documentation. Some of the biggest red flags for the IRS include expensive meals, non-work-related travel, unusual entertainment, and non-doctor-approved medical expenses.
- For any donations, ask your donation recipient for a written statement that includes your name and the donation amount.
- To protect yourself and your business, keep detailed records of vehicle usage related to your company.
If you use Turbo Tax to file your taxes, you automatically receive access to Audit Support Center.
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