irs audit Q?

Discussion in 'Starting a Lawn Care Business' started by wowmowwow, Feb 13, 2007.

  1. wowmowwow

    wowmowwow LawnSite Member
    Posts: 209

    for those who have been audited by the irs yall bring in lots of money or under ,lets say 40k? im wondering cuz ive been told that i have nothing to worry aboutsince im not that big time....

  2. TSG

    TSG LawnSite Senior Member
    Posts: 444

    Has nothing to due with amt of income,,,,,sometimes its random,,,,most of the time its a red flag on your return
  3. wowmowwow

    wowmowwow LawnSite Member
    Posts: 209

    red flag?................thanks
  4. TSG

    TSG LawnSite Senior Member
    Posts: 444

    Red Flag = something that does not make sense
    IE, putting a truck in service in Jan and not showing income till Aug.
    Home office expense 1/2 of what your total home expenses are.

  5. grasswhacker

    grasswhacker LawnSite Gold Member
    Posts: 3,873

    Yes, home office expense would be a rather large red flag since our mode of business is conducted on other people's property and not the principal place of business.
  6. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    While I couldn't agree more on the current standards of big time, there isn't much sense in arguing with some IRS rep over it, either. And since you said the magic words 'under 40k,' it is likely a safe assumption that you're over 30k / year, and most anytime you're over a few thousand / year (2-3 maybe 4k), you need to seriously start thinking about declaring it (and really much sooner than that).

    Way things stand, afaik any income over $600 / year must be declared, and this has been like that for some time. Incomes up to $1000 / year can be declared as a hobby while you might defer another thousand or so via creative accounting... But the idea here is once you get into 5-10k or more via self-employment, you are big time by most standards, when most people who work for someone else hardly ever meet the minimum $600 / year (from secondary sources such as self-employment)...

    It does get to a point where it's nickel and diming, and it frustrates me to have to worry about every few hundred dollars / year, but then the IRS reasons that when millions of folks do it (and millions do), it adds up to a considerable amount. And about here is where I stop arguing about it all, especially knowing the IRS is an institution with thousands of employees, it is a lost cause.

    As for the audit, it will likely be a phone call or they can do it via US mail as well (by sending you forms you need to take care of). In so far as worrying, I think maybe you should be concerned enough to take care of it when it arises, but I would not worry myself to death over it, either.
  7. CA CLT

    CA CLT LawnSite Member
    Posts: 61

    I had an audit on a cryogenic treating company that I started with a friend. Everything was legit, though to them some of my deductions were big red flags. I went in with the stuff they were curious about and they could see that I owed them no money. In fact I think they owed me money back, but once they saw that they asked if it was OK to "close the books on this audit". I decided that that was probably my safest bet to not get thrown into the "this guy is a dick, let's audit him again file".

    After that audit, I'm not afraid of them anymore.
  8. lawnpro724

    lawnpro724 LawnSite Silver Member
    Posts: 2,201

    Just make sure all your deductions are correct and make sure you have reciepts for everything because they will want to see if things ad up. This is the #1 reason for an accountant.
  9. TSG

    TSG LawnSite Senior Member
    Posts: 444

    On a side note, it is always good to have an ace in the hole. By this I mean
    take your garage and the electricity and heat as a work place exemption, but maybe not take your
    computer or home office.
    In the event that you were audited, and did make a mistake,,,,and had to pay,
    you then could ammend that return and take a very valid office deduction.
  10. wowmowwow

    wowmowwow LawnSite Member
    Posts: 209

    so would i divide the garage and power bill separate from my home? that's interesting anyway. we "had to have" a 3k computer from the box store last year (for wife's school)...considering putting that on taxes...and truck...trailer...and big mower. all that is way more than i made, honestly.

    and i guess that's why the CPA is most valuable. give them the audit.
    another "save every receipt" means what? i mean do i have to purchase the mtn dew and lance crackers separately? and what about lunch? I'm not trying to be blind, however, light would enlighten.


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