The IRS's heightened focus on Schedule C filings has led to an uptick in scrutiny, particularly regarding deduction claims. Key areas to pay attention to include:
Disproportionate Expenses: Notices often stem from high salaries paired with unusual expenses for meals, travel, home offices, and business-use vehicles.
Deduction Abuse: While not new, the IRS's vigilance on deduction abuse has intensified, flagging potential overstatements.
How You Can Help Your Clients:
Stress accurate record-keeping: Guide clients to maintain detailed documentation of their expenses.
Advocate for honesty: Encourage full transparency in expense reporting to avoid potential issues.
Educate: Explain the importance of proper documentation and honesty to navigate IRS scrutiny effectively.
This streamlined approach ensures your clients are well-prepared, minimizing the risk of audits and fostering smoother tax filings.