The San Francisco Bay Area is a risk town, especially nowadays. People are taking risks all over – from startups to purchasing real estate in the Bay Area’s frothy market. There is even discussion these days of a new “Internet bubble,” started after Twitter’s IPO. We love risk at Safe Harbor CPA, in the entrepreneurial sense. But we are not so keen on tax risk: we do everything we can to reduce our client’s taxes in a legal and ethical manner.
- Your “Business” isn’t really a business. People might love old cars, but then they buy old cars and create a “business” out of it, solely to generate losses. A real business means real risks, and real profits or losses; be careful about calling a “hobby” a business.
- Your Income Reporting Doesn’t Add Up. This one is easy: your W2 income, 1099 income, and interest income are all computer-tracked tracked these days. They had better “add up” vis-a-vis your tax returns!
- You Love Your Car and its Gas, Too Much. People have to use their automobiles for work, especially businesspeople, but that doesn’t necessarily mean its “tax deductible.” We can advise you on acceptable, and non-acceptable, deductions for cars and car-related expenses.
- The Earned Income Tax Credit. This one is so widespread, but the IRS has really cracked down on it. It is often a very legitimate tax credit, but you want to cross your t’s and dot your i’s to be able to withstand IRS scrutiny.
- International Tax Issues. We are specialists in International Tax in San Francisco, but recognize that the IRS is really holding those who have International business interests, property or other financial assets under a microscope.
- Dependents and Tax Deductions. If you are divorced, only one spouse can “claim” a child as a dependent; be sure to clarify with your ex-wife or ex-husband who “gets” the child as a deduction. Easier said than done, we know, but his is all computerized these days; there’s no fooling Uncle Sam when it comes to this deduction. No double counting, please!
- You’re a Wealthy Individual. Stands to reason that the IRS and California’s Franchise Tax Board go after the money: the richer you are, the more likely you are to be audited, and the more necessary it is to work with a systematic tax professional.
- Charitable Deductions. We love non-profits, and so should you. But you can love them “too much” and it can be “too obvious” if it is used in a strange way. So stay to the straight and narrow.
Those are some quick things to think about. Better yet, work with a tax professional and minimize your risk of an audit.