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The Chances of an IRS Audit are Low, But Business Owners Should be Prepared

Many business owners ask: How can I avoid an IRS audit? The good news is that the odds against being audited are in your favor. In fiscal year 2018, the IRS audited approximately 0.6% of individuals. Businesses, large corporations and high-income individuals are more likely to be audited but, overall, audit rates are historically low.

There’s no 100% guarantee that you won’t be picked for an audit, because some tax returns are chosen randomly. However, completing your returns in a timely and accurate fashion with our firm certainly works in your favor. And it helps to know what might catch the attention of the IRS.

Audit red flags

A variety of tax-return entries may raise red flags with the IRS and may lead to an audit. Here are a few examples:

Significant inconsistencies between previous years’ filings and your most current filing,
Gross profit margin or expenses markedly different from those of other businesses in your industry, and
Miscalculated or unusually high deductions.

Certain types of deductions may be questioned by the IRS because there are strict record-keeping requirements for them • for example, auto and travel expense deductions. In addition, an owner-employee salary that’s inordinately higher or […]

By Linkenheimer LLP|2020-09-03T20:03:36+00:00September 30th, 2019|audit, business, irs|0 Comments

Are You Engaged in Internet Sales in California?

Are you engaged in Internet sales in California? In light of changes to sales and use tax that became effective in April, some retailers may not be certain if they must collect and pay over sales and use tax based on aspects of their businesses. The CA Dept. of Tax and Fee Administration has updated Publication 109 (Internet Sales) to add clarity on many issues. One key change is the addition of details that defines what “engaged in business” in CA means and doesn’t mean. For example, “Offering merchandise for sale over the phone, by mail order, or online will generally not, by itself, cause a retailer to be engaged in business in CA.” Go to https://bit.ly/2OClJka and scroll down. If you have questions or would like more info, please contact your Linkenheimer CPA.

By Linkenheimer LLP|2020-09-03T20:03:43+00:00August 22nd, 2019|sales tax|0 Comments

The IRS is Targeting Business Transactions in Bitcoin and Other Virtual Currencies

Bitcoin and other forms of virtual currency are gaining popularity. But many businesses, consumers, employees and investors are still confused about how they work and how to report transactions on their federal tax returns. And the IRS just announced that it is targeting virtual currency users in a new “educational letter” campaign.

The nuts and bolts

Unlike cash or credit cards, small businesses generally don’t accept bitcoin payments for routine transactions. However, a growing number of larger retailers — and online businesses — now accept payments. Businesses can also pay employees or independent contractors with virtual currency. The trend is expected to continue, so more small businesses may soon get on board.

Bitcoin has an equivalent value in real currency. It can be digitally traded between users. You can also purchase and exchange bitcoin with real currencies (such as U.S. dollars). The most common ways to obtain bitcoin are through virtual currency ATMs […]

By Linkenheimer LLP|2020-09-03T20:03:45+00:00August 13th, 2019|business, irs, w2|0 Comments

New Application Period for a Valuable California Business Tax Credit

Coming up soon is a new application period for a valuable California business tax credit. The CA Governor’s Office of Business and Economic Development has announced that, for fiscal year 2019-2020, a total of $236,808,527 in CA Competes Tax Credits is available. Learn more about applying here: https://bit.ly/2nxiNGc. Applications will be accepted during the following periods: July 29 through August 19, 2019 ($90 million total); January 6 through January 27, 2020 ($75 million total); and March 9 through March 30, 2020 ($71.8 million, plus unallocated amounts from previous periods). This credit is an income or franchise tax credit available to businesses that come, stay or expand in CA. If you have questions or are interested in applying, please contact your Linkenheimer CPA.

By Linkenheimer LLP|2020-09-03T20:03:47+00:00July 22nd, 2019|business, tax credit|0 Comments

The Minimum Wage is to Rise in Sonoma, California

The minimum wage is to rise in Sonoma, California. The city of Sonoma will gradually increase the hourly minimum wage for both small and large employers. Here’s the schedule of hourly rates for employers with up to 25 workers: $12.50 on Jan. 1, 2020; $14.00 on Jan. 1, 2021; $15.00 on Jan. 1, 2022; and $16.00 on Jan. 1, 2023. For larger employers, the schedule of hourly rates is as follows: $13.50 on Jan. 1, 2020; $15.00 on Jan. 1, 2021; $16.00 on Jan. 1, 2022; and $17.00 in 2023. Beginning Jan. 1, 2024, the minimum wage rate for all employees will increase by 3.5%, or a percentage set by a separate Council of the City of Sonoma resolution (whichever is less). Contact your Linkenheimer CPA with your questions.

By Linkenheimer LLP|2020-09-03T20:03:48+00:00July 15th, 2019|business, employer|0 Comments