audit risk

It’s no secret that states are hurting for money, and are looking for ways to raise needed revenue however possible. I’ve been seeing some signs that taxpayers may face an increasing audit risk at the state level, as local governments do whatever it takes to keep the state operating.

My tax wire this morning contained a Notice from the IRS regarding a new Fact Sheet on hobby businesses.

The IRS tends to put out Fact Sheets when they’re seeing a problem come up over and over again, or when they’re anticipating a problem with public understanding. Given the subject matter of this Fact Sheet, my guess is that sole proprietorship audits are going to increase again next year.

One Flag You Don’t WANT to WavePeople like to speculate about IRS “red flags.” These are the things that are certain to cost you an IRS audit, or else definitely put you in their sights.

And, considering that the IRS increased the number of audits on personal returns by 65% last year, you probably want to pay attention to this next part. If you have a business there is one GIANT red flag you might have that you’ll want to get rid of.