Do you know that some IRS forms attract audits?

SOME IRS forms attract audits. Merely filing them causes the Agency to look at your tax returns.

Here are some of them.

Form 1099:

You may have had a side job that paid you more than $400 but you missed to report or did not receive because you moved. Failure to report 1099s activates IRS matching program that detects a missing 1099 or W2. It generates letter CP-2000 when IRS computers detect missing form 1099-MISC, 1099-R, Form 1099-C Cancellation of Debt, or any 1099 form.

Schedule C for Sole Proprietorship Business:

If you run a business as a sole proprietorship (as opposed to corporation or partnership), you need to file Schedule C. This form increases your chances of an audit. Any person who files Schedule C is about four times more likely to receive questions. Many audits that I handled for new clients over 40 years were caused by Schedule C. Bad form.

Schedule C for Uber, Lyft, or AirBNB:

Driving for Uber or Lyft or renting your residence to AirBNB generates Form 1099. IRS receives a copy of that form, so if your tax return doesn’t match the 1099 figures, it prompts IRS to send you a notice of mismatched numbers.

Schedule C for Hobby:

Filing Schedule C is bad enough. Claiming a loss is worse. Using Schedule C to deduct hobby loss is the worst. It’s like begging the IRS to come get you.

Form 5213 for Hobby Loss:

You may want to avoid an audit of your hobby loss by filing Form 5213 to prevent the IRS from auditing you for the first five years – a period typically used when transitioning a hobby into a business. This form creates a safe harbor for you to claim losses from your hobby-turned-business. However, once that five-year window is closed, IRS can come calling if you still incur losses.

Schedule C to Maximize the Earned Income Tax Credit:

IRS can determine if you file Schedule C with just the right amount to maximize your Earned Income Tax Credit. Some taxpayers find it interesting to get a credit in excess of $6,000. The IRS could also find your tax returns interesting for an audit.

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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.

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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].
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Victor Sy, CPA, MBA (retired)

Victor Santos Sy, MBA. CPA (Retired) Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation. * * * He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to [email protected].