The Most Common Schedule C Triggers for an Audit

If the IRS suspects you’re not reporting all of your income, you can get audited. If you’re self-employed, a sole proprietor, or a gig worker, then you might have what’s called a Schedule C audit. You can avoid getting audited, however, if you keep good track of your expenses or work with a tax attorney.

Schedule C Audit Triggers

Schedule C is a tax form for reporting business income and expenses for self-employed people. If the IRS questions your reported income, expenses, or deductions on your Schedule C, you might get audited.

The most common triggers for a Schedule C audit are:

• Failing to report all of your self-employment income
• Claiming incorrect tax deductions (deducting personal expenses as business expenses)
• Failing to report capital gains when you sell business property
• Exceeding the standard mileage deduction
• Overstated business losses
• A Schedule C that is significantly inconsistent with previous years or other similar taxpayers
• Operating in a cash-heavy or “risky” industries

Many of these triggers come from honest mistakes when filling out Schedule C. They can also come from improper or disorganized bookkeeping or not having a separate bank account for your business.

How to Pass a Schedule C Audit

Even if you’re sure you’ve filed everything correctly, you might still get audited. If you want to pass, be sure to keep organized documents in a secure place. Keep all receipts for your business expenses and track all invoices you send.

When you receive the audit notice, please read it carefully and provide the IRS with all the documentation they’re asking for. Be cooperative and courteous with the auditor—they’re just trying to do their job. Don’t put off requests from the auditor for long, either. Respond promptly so you show good faith and work toward getting the matter resolved more quickly.

Call a Reliable Tax Attorney

If you get audited for your Schedule C, you can also call a Maryland tax attorney to help you sort things out. At Gabaie & Associates, LLC., we can deal with the IRS for you. If you’re a self-employed taxpayer in Baltimore, Columbia, Frederick, Rockville, or anywhere in Maryland, call us (410) 358-1500 or fill out our online form.