I've heard that freelancers get audited more often than employees.
What are your top tips to keep the likelihood of that down (e.g. making sure the expenses in each category fall into a normal range and how to check that, etc.)? Thank you!
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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:
If you use Turbo Tax to file your taxes, you automatically receive access to Audit Support Center.
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:
If you use Turbo Tax to file your taxes, you automatically receive access to Audit Support Center.
Hi momosgirl,
I understand your concerns since there are more self reporting elements in a Schedule C, Profit or Loss From Business. Recommend the following:
(1) Top Five Ways to Avoid a Tax Audit
(2) Report all business income and business expenses in its entirety with supporting documents in case of IRS inquiry.
(3) Review Schedule C expenses categories for proper classification, i.e. do not have a very large Misc. expenses without description.
https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf
(4) TurboTax Audit Meter at end of Schedule C is helpful.
(5)
When the IRS Classifies Your Business as a Hobby
If your business claims a net loss for too many years, or fails to meet other requirements, the IRS may classify it as a hobby. Running a hobby as a business could very possibly trigger an IRS audit.
Hope the above helps. Thank you.
VERY, very helpful, and also reassuring. Thank you so much.
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