Author: Jeff Voytko

Categories
mycurator

As the 2025 tax season gets underway, taxpayers must decide between taking the standard deduction or itemizing their deductions — a choice that could significantly impact how much they owe or save. The standard deduction is a flat amount that reduces taxable income, while itemizing allows individuals to deduct specific expenses, such as medical bills, […]

As the 2025 tax season gets underway, taxpayers must decide between taking the standard deduction or itemizing their deductions — a choice that could significantly impact how much they owe or save.

The standard deduction is a flat amount that reduces taxable income, while itemizing allows individuals to deduct specific expenses, such as medical bills, mortgage interest, and state and local taxes. However, itemizing requires documentation and only makes sense if the total deductions exceed the standard deduction threshold.

For the 2024 tax year, the IRS has set the standard deduction amounts at:

  • $14,600 for single filers
  • $21,900 for heads of household
  • $29,200 for married couples filing jointly or qualifying surviving spouses

According to Phyllis Jo Kubey, an enrolled agent and tax expert, the decision should come down to simple math: “If your itemized deductions are going to exceed the standard deduction, you definitely want to itemize.”

Despite the potential benefits, only 9% of taxpayers itemized in 2022, largely due to changes from the 2017 Tax Cuts and Jobs Act, which nearly doubled the standard deduction and limited many itemized deductions.

Common itemizable expenses include:

  • Medical costs exceeding 7.5% of adjusted gross income
  • State and local taxes (up to $10,000)
  • Mortgage interest (on debt up to $750,000 to $1 million, depending on when the home was purchased)

For those choosing to itemize, meticulous record-keeping is crucial. The IRS can audit returns for up to three years, or up to six years if significant errors are found.

Ultimately, taxpayers should review their expenses carefully to determine which deduction method offers the greater financial benefit.

 

Click here to view original web page by Allie Jasinski on BusinessInsider.com.

Categories
mycurator

For LLC business owners, understanding what not to do is just as important as knowing what to do—especially when it comes to avoiding an IRS audit. According to Karla Dennis, EA, MST, and CEO of KDA Inc., there are several frequent missteps she sees entrepreneurs make that can raise red flags with the IRS. Here’s […]

For LLC business owners, understanding what not to do is just as important as knowing what to do—especially when it comes to avoiding an IRS audit. According to Karla Dennis, EA, MST, and CEO of KDA Inc., there are several frequent missteps she sees entrepreneurs make that can raise red flags with the IRS. Here’s a breakdown of the most common audit triggers and how to avoid them.
  1. Not Filing Taxes on Time
    One of the biggest audit triggers is simply not filing a tax return. Many business owners mistakenly believe that no income means no filing requirement, but forming an LLC automatically creates one—regardless of earnings. Failing to file can result in the IRS issuing a “substitute for return” and beginning enforcement actions.
  2. Ignoring Estimated Tax Payments
    LLC owners are typically required to make quarterly estimated tax payments. Failing to do so may result in a large year-end bill and increase the chances of an audit. The IRS often sees missed payments as a sign that the taxpayer may not understand how to report income and expenses correctly.
  3. Not Reporting All Income
    Many owners assume that if they didn’t receive a 1099 form, their income isn’t on the IRS’s radar. However, entities that issue 1099s also report them to the IRS. Failing to report all income—no matter how small—can lead to serious consequences, including CP2000 notices and potential audits.
  4. Overreporting Expenses
    While legitimate business expenses are deductible under IRS rules, reporting excessive expenses—especially when paired with little to no income—can trigger an audit. If your financials are atypical, including a brief statement in your return may help preempt IRS concerns.
  5. Not Issuing 1099s to Contractors
    LLC owners are required to issue 1099s to all qualifying contractors, including remote workers abroad. If working with foreign contractors, backup withholding (typically 30%) may be required. Failing to comply with this obligation can lead to audit flags.
  6. Using Rounded Numbers
    Rounded estimates like “$500” or “$2,000” are a red flag. Real business expenses rarely total such clean figures. Always use actual amounts from records like bank or credit card statements to avoid drawing unnecessary scrutiny.
  7. Failing to File for Each LLC
    Every LLC must file a tax return—even inactive ones. If you’ve created multiple entities, be sure to file returns for each or formally dissolve any that are no longer in use to prevent ongoing tax obligations.

Many LLC owners inadvertently invite IRS attention due to a lack of awareness about their tax obligations. Staying compliant by filing on time, reporting all income, avoiding exaggerated deductions, and maintaining accurate records can go a long way in keeping your business off the audit radar. Always consult a tax professional for guidance tailored to your specific situation.

Click here to view original web page at forbes.com by Karla Dennis, EA, MST, CFO/CEO of the award-winning tax accounting firm KDA Inc.—specializing in tax planning.

Categories
mycurator

As tax season rolls around, it’s important for filers—especially small-business owners—to avoid common missteps that could trigger an IRS audit. While the IRS often corrects minor errors automatically, certain red flags can lead to deeper scrutiny. Stephen Weisberg, principal attorney at The W Tax Group, highlights four key audit triggers and how to steer clear […]

As tax season rolls around, it’s important for filers—especially small-business owners—to avoid common missteps that could trigger an IRS audit. While the IRS often corrects minor errors automatically, certain red flags can lead to deeper scrutiny. Stephen Weisberg, principal attorney at The W Tax Group, highlights four key audit triggers and how to steer clear of them.

 

  1. Failing to Report All Income
    One of the most straightforward yet common mistakes is forgetting to report income. The IRS receives copies of all income forms, such as W-2s and 1099s, and will compare them to what you report. Overlooking income from freelance work, interest, or stock sales can lead to an automatic audit.To prevent this, keep organized records and wait to file until you’ve received all income documents. Employers and payers are generally required to send these forms by January 31. If a form doesn’t arrive, reach out to the issuer before submitting your return.
  1. Overstating Business Expenses or Underreporting Income
    Small-business owners must be especially cautious. Large losses or unusually high expenses reported on Schedule C can raise suspicions that personal costs are being claimed as business deductions. Consistently reporting losses over several years may also lead the IRS to question whether the business is legitimate.Cash-heavy businesses such as restaurants, barber shops, and salons are especially vulnerable to income misreporting concerns. Accurate and consistent recordkeeping is key.
  1. Misusing the Home Office Deduction
    Claiming a home office deduction is legitimate for self-employed individuals who use a dedicated space exclusively for business. However, misapplying this deduction—especially for remote workers employed under a W-2—can prompt audits.There are two ways to calculate the deduction:
  • Simplified method: $5 per square foot, up to $1,500.
  • Direct method: Deducts a portion of household expenses based on the office’s square footage.

    Whichever you choose, it’s essential to maintain clear documentation to prove business-exclusive use of the space.

  1. Overreporting Vehicle Use for Business
    If you deduct vehicle expenses, be honest and precise about business vs. personal use. The IRS may question excessive mileage claims that don’t align with the nature of your business.Use a mileage log to record the date, distance, and purpose of each business-related trip. You can either deduct based on total mileage or itemize individual vehicle-related expenses.

While an IRS audit may not be common, making these errors significantly increases your risk. Proper recordkeeping, accurate reporting, and a clear understanding of what qualifies as a legitimate deduction can help you file confidently and avoid unnecessary trouble with the IRS.

Click here to view the original web page by Christine Ji at forbes.com