If you are a small business, listen up! The Small Business Administration (SBA) has some great news for businesses that are still struggling through the pandemic. In December 2020, Congress voted to allocate an additional $284 billion to the Paycheck Protection Program (PPP). The PPP is a forgivable loan program established by the CARES Act. The SBA and the Treasury Department have reopened the PPP loan portal, so small business owners, like you, will be able to apply for extra aid. You’ll have to act fast, though, because the deadline for new loan applications is March 31, 2021. Learn more.
Top 10 deductions that may make the IRS go hmmmmm!
By Andrea MacDonald, CPA
Each year, we file our taxes and cross our fingers in the hopes that we won’t receive a letter from the Internal Revenue Service. Why? Because that letter means your taxes are being audited. A tax audit is when the IRS performs an in-depth examination of your personal tax return to ensure complete accuracy. This happens when the IRS system flags anomalies in your tax deductions or total income. Tax deductions are deductions all taxpayers are legally allowed to claim to reduce their taxable income.
To best prepare yourself for tax season, you should be aware of the following red flags that might put you on the IRS’s radar.
1. An Income Over $200,000
There’s not too much you can do to avoid this red flag, except report all sources of income.
2. Large Donations to Charity
Donating a significant amount of money to charity that’s disproportionate with your income will trigger the IRS’s interest. If questioned, always provide documentation.
3. Foreign Accounts
Report your foreign accounts. Rules for foreign account reporting have changed. Taxpayers who have interest in or signature authority over foreign financial accounts must report them to the Treasury, if the aggregate balance exceeds $10,000 at any time in the year.
4. Early Retirement Withdrawal
Withdrawing from a retirement account before the age of 59 and a 1⁄2 for something other than a first-time home, education expense, or emergency medical issue will cause suspicion from the IRS and lead to questions, especially if not reported on your tax return.
5. Claiming Rental Losses
If you are not a real estate professional, the IRS might ask questions if you claim rental losses, so avoid trouble by backing up your claim with documentation.
6. Unreported Income
If the IRS finds out about another source of income that you did not claim on your taxes, you will be audited. Being upfront and honest will allow for smooth seas ahead.
7. Owning a Business
Since many business owners have claimed falsely in the past, the IRS typically takes a closer look at business owners. Make sure to claim your actual income and don’t claim exaggerated deductions.
8. Business Use of a Vehicle
As long as you are good at recording each business trip with the dates and mileage, you should be able to bypass any additional questions the IRS might have for you.
9. Excessively High Deductions
Claiming large amounts on deductions might raise a few alarm bells with the IRS, but it’s nothing that proper documentation can’t solve.
10. Large Business Expenses
If you claim a large amount for business meals or travel, be prepared to validate your deductions with documentation.
If reading this has created more questions, contact our office. Call (757) 420-1539
Andrea MacDonald, CPA is the owner of Pro Tax & Accounting in Chesapeake, Virginia. For nearly two decades, she has been working with businesses on their bookkeeping, accounting and taxes. She also works with individuals and families on their tax returns. Andrea is a Certified Public Accountant (CPA) and a qualified bookkeeper and tax professional. She is well-versed in tax law, which makes her an invaluable resource for any business.
At Pro Tax & Accounting, we keep you from breaking the bank!
Pro Tax & Accounting is your go-to resource for businesses bookkeeping, accounting services, payroll, QuickBooks Consulting and tax services. President and owner, Andrea MacDonald, CPA, is a Certified Public Accountant. Andrea and her team have the education, knowledge and experience and work with businesses throughout the Hampton Roads Virginia cities of Chesapeake, Norfolk, Virginia Beach, Suffolk, Newport News and Hampton, north into Williamsburg and throughout the mid-Atlantic region. And thanks to technology, Pro Tax & Accounting can work with clients anywhere in the world!
Call today and free up the time you need to run your business, and leave the bookkeeping and accounting up to the experts!
Call Pro Tax & Accounting for your
Bookkeeping & Accounting Services. (757) 420-1539