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Has Anyone Been Audited by the IRS?

by Seller_ZaaaM1CHKEbro

I am being audited by the IRS for the past two years…has anyone else been audited?? (just for my Schedule C’s) Wondering if the IRS is targeting Amazon sellers or if it was someone else turning me in to be insidious. If you have been, how brutal was it? anything I need to be aware of? Thanks in advance…

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Seller_zDXVpmGz86diF
In reply to: Seller_ZaaaM1CHKEbro's post

Never been audited here (knock on wood), but if you keep good records and are doing things by the book, you should have nothing to worry about (except for added stress and the loss of time).

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Seller_mWZyJunCxCR84
In reply to: Seller_ZaaaM1CHKEbro's post

It is rumored that certain deductions can sometimes trigger the IRS to audit certain people. A number of years ago, the IRS was auditing a higher number of people that claim the exemption of office space in their home.

Also, too much of certain deductions can trigger an Audit. The more problems they find with your return, the deeper they look into it. The less problems they find, they often do not look as deep. They are understaffed like like many other agencies.

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Seller_tRyDWGumh37sc
In reply to: Seller_ZaaaM1CHKEbro's post

Nope smooth sailing for me from irs but im not a big fish either

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Seller_nvPWGullEqCs1
In reply to: Seller_ZaaaM1CHKEbro's post

I use TurboTax and did get a warning about the Square Footage I was claiming for Home Office. So I took it down a little.

I was going to just do the whole basement, since nothing is down there but inventory and supplies, though I have two full bedrooms full of inventory and half a garage, not including inventory in the living room and master bedroom.

Instead I am doing the two bedrooms and half the basement and took it down to about 32.5%.

Anyways, the point is that TurboTax gave a potential audit alert for around 42.8% Home Office.

It seems like I also got a warning for too much interest deductions, and once again, I did not even claim everything.

From what I understand, if you are audited, you can actually claim more than you filed if you left things off, for me, I could actually claim all interest paid and all home office square footage.

COGS would be the biggest headache I am sure.

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Seller_BwCRZStszCnCv
In reply to: Seller_ZaaaM1CHKEbro's post

Unusual patterns of expenses are a frequent trigger. If, one year, your expenses vary significantly from what they have been in prior years, that could send up a red flag. Your return is also likely to attract attention if your expenses are deviating markedly from what other on-line sellers are reporting. For that reason, it’s important to specify, as clearly as possible, what the precise nature of your business is. And nothing prevents you from providing an explanatory note with your tax return in the event that you have an unusual expense or pattern of income that would naturally raise a question.

I always make sure that at the top of Schedule C, where the form requires you to state the nature of your business and to provide an occupation code, I identify my occupation as “On-line selling (Amazon).” That immediatly explains why my home office is an ordinary and necessary expense, why I have only negligible rent, office, and utility costs, and why approximately 50 percent of my gross income goes out as fees & commissions. The parenthetical “Amazon” tells them that I’m not a “fly by night” who has varied and undocumented sources of income and that my records are, more likely than not, backed up with verifiable documentation from a third party.

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Seller_ZaaaM1CHKEbro
In reply to: Seller_ZaaaM1CHKEbro's post

Okay, so I had my audit. It…was…vicious. And I had a sweet little lady IRS auditor. She DID ask about my home office space. I explained to her my set up. I store inventory in my loft, garage, and I use my formal dining room/living room area for my office. She didn’t discount any of that. HOWEVER, when it came to the utilities she was pretty strict. Would not allow one iota of electric or trash or anything. She only allowed the internet charges. That SUCKED! I don’t think it was right at all. She did allow my Wireless bill but took off the kids’ phones. Darn it! She DID want to see where I got my numbers from. So I went thru how I got the gross sales from the 1099-K and then (thanks to that report that amazon has) I was able to show her that I subtract the refunds/returns and shipping and all that extra stuff…then I showed her my COGS. (I was afraid she would not allow some of the items I included in that…and put it below the line, but she didn’t…she just wanted to see my numbers…but of course I had 50lbs of invoices, etc… to show her, so that might have helped) She also wanted to see how I came up with my beginning and ending inventory numbers. uhhhhhh……I just wing it basically. She gave me the stink eye over that, but she let it slide. I promised I would get an inventory system going. She did not allow any attorneys fees even though the business was about 90% of my divorce. Be sure your lawyers put in the invoices that the business was talked about, etc. I lost my shorts with that, and it wasn’t made up or exaggerated. That was about it. I think as long as you have all your documentation squared away, and you show up to the audit with all your docs they mostly just stick to the things that stand out…or the usual suspects. I had 99.9% of all of my invoices/receipts, etc… So I was pretty lucky. If I hadn’t of showed up with it I am positive she would have tossed out my numbers. I was also pretty organized, which was good because my mind went BLANK as soon as we started!!! Also, they do have a time limit…mine was 4 hours. It took almost all of the 4 hours. I wish I would have studied my return better so I could have answered some of her questions better. It was 2016 and 2017 that I got audited so my memory was pretty fuzzy. Okay, just thought I would share with you all.

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Seller_btjkGKmcpTKAi
In reply to: Seller_ZaaaM1CHKEbro's post

Get a tax attorney that practices and appears in tax court on a weekly basis. They will guide you and de-fang the puppy auditors that seem scary now. Expect to pay for it.

OkieDokie

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