Joe is a mortgage broker. He works from a fourth bedroom in his Folsom home. The overhead is low and the work is not very stressful. He sees his grandkids almost every day because he chooses when, and how much, to work. Joe has been doing this for 15 years in Sacramento County. He makes $100,000 a year and is quite happy with his life. Other mortgage brokers with 15 years’ experience and running the business from a fourth bedroom also make $100,000 a year. This is a pattern the IRS sees year after year. The IRS’ supercomputers see Joe falling within the norm.
Andy also writes mortgages. He works from a fourth bedroom and like Joe, has 15 years’ experience. Joe thinks the government is too big and does some “creative bookkeeping.” His return says he makes $55,000 a year and his new home in South Lake Tahoe is a business expense. The IRS’ supercomputers see Andy is far outside the norm and select his return for an audit. Was it the low income? Was it the South Lake Tahoe home as a business expense? Was it both?
Don’t end up like Andy. Hire a professional tax preparer who can tell you what typically triggers audits. This will save you time, money and frustration in the long run. Dave Fechter has 30 years’ experience and can tell you what typically triggers audits. For help with your tax returns or finances in general, contact Dave Fechter, CPA at (916) 984-2081.