Schedule C Problems to Avoid
If you are self-employed you are probably familiar with schedule C. Even though you may know a lot about your tax situation and what the IRS expects from you, filling out and filing schedule C is not always the easiest thing to do. Here are a few schedule C problems to avoid:
1. Don’t forget to track your income and expenses. Many self-employed professionals get so excited and caught up in their business that they forget about this detail. It is important to have a flawless system for tracking income and expenses. Any mistakes or omissions will throw your schedule C out of whack.
2. Know which deductions are for business and which ones are not. Take for instance a freelance writer who purchases a new computer. Even though you may use the computer for business, if you also use it on a “personal basis” you cannot deduct 100 percent of the purchase price, maintenance, etc.
3. You need to keep great records in case you are audited. A tax audit is not something you ever want to go through, but every year millions of Americans face this scenario. The IRS is aware that self-employed professionals are in a unique situation, so they will be watching you. Be sure to keep accurate records in an easy to understand format. When you have documentation to backup your claims you never have to worry about a tax audit ending badly.
If you need to file a schedule C it is important to avoid the problems detailed above. These potential issues wreak havoc on many taxpayers every year.
