How to Figure Out Small Business Credit Reporting

Your company’s credit reports directly affect your ability to compete and grow. Unlike a personal credit report, anyone can pull your business credit report — they don’t need your permission. “You want to make sure you have good business credit because it’s one of the primary ways businesses decide whether to do business with you,” says Amber Colley, director of sales partnerships for Dun & Bradstreet Credibility Corp. “They are making critical decisions to determine whether to sell to you, lend money to you, and to determine whether you’re a viable partner.”

“We do pull a business credit report, there’s no doubt about it,” agrees David Goldin, president and CEO of AmeriMerchant, a New York City firm that provides merchant cash advances, business loans and inventory purchase programs. “It’s one piece of the puzzle.”

Your business credit record may influence not only a company’s decision about whether to do business with you, but also the terms of any deals they offer. “Interest rates can be determined on the content of your business credit report, insurance premiums can be determined on this data, as well as terms and pricing with your suppliers,” says Colley.

How to check your business credit report
You can confirm that your small business is listed with Experian, Equifax or D&B by searching their websites at no cost. Note that if you operate under a DBA (doing business as) license, you may see search results returned in your legal name or the company name. In either case, if your small business comes up in the results, your company has a credit report with that bureau.

Each company offers an assortment of individual reports and ongoing credit monitoring. For example, you can access a copy of your D&B credit report for free using the Company Update feature (you’ll need to first apply for a free DUNS number — a unique nine-digit identification number for each physical location of your business); D&B’s free Credit Signal product will also show if your credit score has changed (but not the actual score) and track how many times your file is being accessed. At the other end of the cost spectrum, Experian’s $1,500 a year Business Credit Score Pro subscription plan allows you to access your report 30 times a month and includes your business credit score as well as a host of other features (though the company recommends its $129/year Business Credit Advantage package, which gives you unlimited access to your own report).

That will help you pinpoint areas of weakness that may present your company as a higher credit risk. It will also give you the opportunity to identify and challenge any suspicious or fraudulent activity that has had a negative impact on your report, including business identity theft. “We always recommend that they’re constantly monitoring their business credit report,” Ward says, “and certainly, if there are adverse actions, we’ll take care of those immediately.”In keeping with consumer credit practices, Experian will also provide you with a copy of your business report at no charge if your company has been denied credit by a prospective lender.

Unlike consumer credit files, business reports cannot be frozen if the company’s owner finds something amiss, but owners can dispute information by way of a fraud statement, also known as a fraud alert. “It’s important to understand that a fraud alert is not a security freeze,” Ward says. “A fraud alert is a message that displays on the business credit report for lenders to see so that they can take additional cautionary measures and actions on the verification of the business.”

So then… how do I build business credit?
Well, you need to setup proper trade relations with specific vendors that report to the credit agencies. Not only this, but you must acquire a D.U.N.S. number, as well as ensure all your information is correct. You may also build business credit using personal guarantees to expedite the process, but that’s only if you have good personal credit. Fortunately, Fortune DNA offers a business credit program for a low, reasonable price. If interested, visit We’ve serviced thousands of clients, and we have one of the largest selections of vendors to choose from.

By Randy B. Hecht, Elaine Pofeldt & Fortune DNA

How to Attract More Customers

Here’s a great article on how to attract customers for your business. The consumer is the life of a business — it’s the reason it exists. To expand your clientele would be to expand your business, your profit, and more.

Attracting customers is one of the top challenges for startup businesses, especially if you do not have any marketing background yourself. However, the principles of marketing are common sense and can get you a long way without excessive expenditure.

1. Know Yourself
Time spent on working out what makes your product or service special (its unique selling proposition) is time well spent because it helps you differentiate yourself from the competition. Clarifying your mission and values will provide you with a framework for positioning your business.

2. Know your Customers
Who is supposed to buy your product or service? Be clear about who you want to sell to. Even if your service or product theoretically could be of interest to almost everybody, pick a customer segment and start marketing to it. Once you have decided on a market segment, it will be easier to decide how to reach potential customers and which channels to focus on.

3. Set a Budget
Making a marketing plan and allocating a fixed budget can help you keep an eye on costs. It is easy to overspend; having a budget will help you focus your mind and your marketing activities. Beware of advertising scams: Unscrupulous fraudsters systematically target new businesses. If a deal sounds too good to be true, it probably isn’t any good at all. Don’t commit to anything over the telephone, and don’t be shy to say “no thank you”.

4. Care for Contacts
Referrals and word-of-mouth are a fantastic way to get new customers. Think about who you know who could help endorse your business. Ask for testimonials, referrals and recommendations.

5. Be Visible
A website is a must for any new business, but it can be simple and inexpensive. The three most important elements are: Your contact details, a compelling offer and an attractive design. The same applies to any other promotional material such as leaflets, flyers and posters.

This helpful information was provided by sme-blog.

4 Business Growth Tips

Upon starting up your business, you likely put a lot of thought into it. You may have asked for help from different advisors, books, website articles, and more. You’ve likely invested a LOT of time and effort into your business JUST to get it off the ground. So… now what do you do?

You might be wondering, “What can I do to grow my business? How can I improve? How do I become successful?” There’s many ways to do this, and in this, we’ll be listing off some of our top 10. Of course, you may need to invest more time, money and sweat in order to do this, but so long as you’re ready, we’re ready to help you.

1. Open another location.
– This may not be the best choice, considering different variables in your environment, but this is often times what comes to mind first to many businessmen. Business owner, consultant, and entreprenuer Nick Malis says, “Expansion isn’t always the best answer. It’s all dependant on your planning, research, and more.”
Here are some valuable tips in consideration of this step:
Look at economic trends, for indications of how your company will stay present and remain profitable.
Make sure you have an AMAZING management team for this location: You’ll need them to get this new location up and running.
Determine financial options. Figure the best way to obtain money for your location. Perhaps you need a loan? Don’t have the credit for it? Don’t worry, we have a business credit program.
Choose a GREAT location for THE BUSINESS. Not for what is the cheapest and easiest, but rather for what’s best for business.
Make sure you manage to keep a profit, as well as a steady growth throughout the years.

2. License your product.
– If you have a branded product, or a sort of service, this can be a GREAT low-cost growth method. Not only does this help your growth IMMENSELY, but it also minimizes your risk, and has an incredibly low price in comparison.

3. Do Google Adwords Testing
– One of Google’s best features is it’s AdWords program that allows for low-cost advertisement on one of the world’s biggest audiences. In comparison, it takes usually a few thousand dollars for a good advertisement campiagn, but with Google AdWords, it takes a few hundred dollars at most. And it reaches thousands of people, if not HUNDREDS of thousands! If you need assistance in starting up an AdWords campaign, there’s plenty of courses online to teach you!

4. Look at yourself as one of the best!
– You’re only as successful as you make yourself out to be. Don’t let your business make you closed-minded, make yourself think you’re one of the best in the business, and then behave accordingly. You need to work on a positive mindset, or else you will inevitably fail!

Small Business Tips on How to be Successful

The Small Business Tips on How to be Successful

1. Deeply examine your competitor, as well as the strategies and various steps they used/took to do well.

2. Try innovation. Look to improve upon your products, or look to introduce new products. This can often help small businesses flourish and have a great year.

3. Remember to focus on finding solutions rather than stressing and dwelling CONSTANTLY, thus destroying your efficiency. You should have a deep understanding of what went wrong in the past year and take steps to improve upon it.

4. Remember not to repeat your mistakes! A business should be a constant learning process — there should be no repetitive trend showing if you’ve had it happen before!

5. Take a look at some opportunities/steps to expand your business. Whether that be through opening a new location, hiring a new set of employees, or raising capital. If you’re looking to raise capital, bear in mind that Fortune DNA offers an unbeatable business credit program. We have lists of vendors you can use to build your credit, and we show you the exact way to do it. If interested, call (702) 637-4040 for more information.

6. Finally, take a look at what you did correctly, and continue to do so! If it worked before, there’s a high chance it’ll work again this time around.

How am I perceiving my business?

Here’s a great article about how to perceive your business. Perception is everything. How am I going to look at this business of mine? Is it going to be looked at as a challenge, or will it be looked at as an opportunity? Why have I started a business? To make money, or to become successful?

Why are we even starting a business? Is it passion, are we driven to do something new, or as Steve Jobs put it make a dent in the universe? Start a business, grow it and then do an IPO – world domination next!

For many the reality often has little to do with passion! It has more to do with being a back-office manager, than an entrepreneur – why is that?

In the daily grind we lose our passion and are now driven more by necessity and other secondary business considerations, like accounting and red-tape.

Shouldn’t it be easier to run a business?

I believe it is, if you manage to keep yourself from losing your business focus and with that control of your business.

How do you do that?

You need to think ABOUT your business, not IN your business.

It starts of with having a plan and sticking to it, until you change the plan. Don’t let the plan be changed by circumstance, you need to stay master of your plan.

For this to work you need to take time out, go for a walk and think about your business. Don’t do it in your office and switch your mobile off. If you are really lucky and you have a business mentor, take him/her on this walk with you.

Given the right focus, you will soon work out what you need to do and then the sky is the limit.

This helpful information was provided by sme-blog.

Promote your Business Using the Web

Here’s a great article about promoting your business online. There’s no doubt your marketing and promoting methods will be a major factor in whether or not your business succeeds. If you need some guidance, or advice, feel free to call the Fortune DNA offices at (702) 637-4040 for a free 30 minute consultation.

If being ‘tech savvy’ is not your forte, then it might be wise to start thinking more about ways the internet and digital media can help promote your business, as there is an increasing number of new marketing opportunities out there which are fairly cost efficient – especially if you are willing to be a bit creative. Many of you readers probably have some kind of idea of how the internet works and the opportunities that are around, as you happen to be reading this article (I assume), on the internet.

Even though there is time and money that needs to be invested, when used correctly, marketing via the internet can provide even smaller businesses a decisive boost and advantage over competitors. Nowadays, barely anyone is arguing over the tremendous importance of incorporating the internet into main business promotion strategies.

Being found on the web

Even when the bakery store around the corner has its own web presence, being non-existent on the internet in today’s digital age is simply not an option. Just like your business not being added to the Yellow Pages a decade ago, not having your business placed on Google Maps or on online business directories can turn your business virtually invisible, as consumers now use the internet as their first point of reference when searching for companies. Smartphones providing consumers with the internet wherever they go is a likely reason for this trend.

Therefore it is not surprising that an online advertising strategy for any business involves the creation of a user friendly and well organised website. Not only should users be able to easily find the business website that they are seeking but once on there, they should also be able to find the information that they are searching for. If not, then in today’s fast-paced and competitive world they are likely to move on to find the business of a local competitor. This is why knowing how to give users exactly what they want and keeping things simple, remains to be the most important guideline when designing a webpage and for an online marketing strategy in general.

Social media marketing and promoting deals

In saying that though, a good website doesn’t come cheap, especially for new and smaller enterprises. If investing thousands of dollars for a website is too unrealistic, don’t forget that social media marketing and promoting your deals on voucher sites like these can prove just as effective. With most internet users connecting themselves to social networks such as Facebook and Twitter, businesses can easily reach loyal or new customers and maintain interest.

Though, at the end of the day, word of mouth is still the best form of promoting your business. Publicising discounts of your establishment via the web, has proven successful for new businesses, leading new customers your business, restaurant or service. Although social media has grown at a tremendous pace during the last years, do keep in mind that some demographics may not use it actively. So depending on your target demographic may mean that in order to reach as many customers as possible, an integrative marketing approach is needed.

This helpful information was provided by sme-blog/Voucherbox.

Thousands Of Small Businesses Will Also Start Losing Their Current Health Policies Under Obamacare

Thousands Of Small Businesses Will Also Start Losing Their Current Health Policies Under Obamacare. Here’s Why

President Obama’s simple line “If you like your current health plan you can keep it” is haunting him amidst reports that 3.5 million Americans who purchase health plans on their own, in the “individual” market, have lost that coverage as a result of Obamacare.

Very soon, small businesses will be faced with a similar fate.

They will also see their health plans canceled as a result of Obamacare.

Small businesses, with fewer than 50 employees, are not forced to provide coverage under Obamacare.

But when they do, policies sold in the small group market are subject to the same regulations now forcing the termination of millions of health plans sold directly to consumers.

But late last year, businesses that employed fewer than 50 employees began exploiting a loophole they found in the Obamacare text. If the businesses renewed their policies early, before the end of 2013, then those plans would not be subject to Obamacare’s costly mandates for a full year, in many cases until December 31, 2014.

But that clock is already ticking. Starting in October 2014, many employees of small businesses will start getting the same notices that are now being mailed to individuals, informing that their existing health plans are also being cancelled.

These small businesses will be faced with a bleak choice.

Find another policy that’s compliant with Obamacare, but also more costly. Or put their employees into the Obamacare exchange.

For many of the largest insurers, including Aetna, United Healthcare, Wellpoint, and Cigna; the small group market is among their most lucrative insurance products. For this reason, these big insurers are likely to try and hold onto some of this business.

But they will not be able to fully shield businesses from the new costs.

While a smaller percentage of business plans may get cancelled (relative to the fraction of individual market plans that are now being terminated) the small group market is nonetheless much bigger than the individual market. Even if Obamacare materially affects a smaller fraction of the business plans, it will still encumber far more people than the 3.5 million individuals now losing coverage.

The health plans offered by small businesses are being affected later than the policies sold in the individual market because of a loophole in the law. It let them skirt the full impact of Obamacare past the January 1, 2014 deadline that the individual market policies are now finding themselves subject to.

Insurers are now giving notice that they are dumping those individual market policies to meet that January 1 termination deadline (they need to give consumers 90 days notice under HIPPA rules). In contrast, by renewing their policies “off cycle” the small businesses were able to lock in another year before they have to comply with Obamacare. They won’t be subject to the law’s mandates until the end of 2014.

This means that employees of small businesses wont get their cancellation notices until October or November of 2014. That’s because these plans are subject to ERISA rules. These regulations require businesses and health plans to notify consumers 60 days before they plan to change or terminate policies. News of cancellations will go directly to employees, just like the termination notices now arriving in the mail.

News of this looming catastrophe could start to filter out earlier. Health plans have to submit their products to state insurance commissioners (and get rates approved) in the spring and summer of 2014. That’s when politicians will start to get a more precise view on how many policies will be canceled and what the new rates will be.

How much will small businesses be affected once they are also made subject to the full brunt of Obamacare? Aetna has already warned in its marketing materials that dramatic increases in premiums might be in the offing. “Factors such as essential health benefits, maximum plan deductibles, the application of new taxes and fees and new rating rules will combine to push insurance premiums up substantially for some small businesses,” the insurer said.

In December, Aetna Chief Executive Mark Bertolini said he expects that premiums for individuals or small groups seeking coverage on health insurance exchanges will rise by 20% to 50% in 2014, after the grandfathering expires.

This is what really has Democrats so worried. These cancellation notices are going to hit small businesses one month before the next election.

Congress could introduce legislation to allow the existing small business plans to be extended indefinitely. Most of these are good plans already subject to strict state regulation. There is no reason Obamacare should force changes.

It’s another painful blow set to befall consumers as a result of Obamacare.

Every time another layer of this law gets peeled away, or another provision gets implemented, another block of Americans gets harmed.

Small business policies are the next to fall.

Scott Gottlieb

IRS Announces 2014 Tax Brackets

IRS Announces 2014 Tax Brackets, Standard Deduction Amounts And More

The Internal Revenue Service has announced the annual inflation adjustments for a number of provisions for the year 2014, including tax rate schedules, tax tables and cost-of-living adjustments for certain tax items.

These are the applicable numbers for the tax year 2014. That means the year starting (gulp) in just a few months. They are NOT the numbers and rates that you’ll use to prepare your 2013 tax returns in 2014 (the season is starting late this year). These numbers and rates are those you’ll use to prepare your 2014 tax returns in 2015. Got it? Good. Onto the highlights:

Tax Brackets. The big news is, of course, the new tax brackets. Here’s what’s on tap for 2014:

Single Taxpayers:

Single Taxpayers

Married Filing Jointly and Surviving Spouses:

Married Filing

Head Of Household:

Head Of Household

Married Filing Separately:

Married Filing Seperate

(See how they compare to the 2013 brackets here.)

Standard Deductions. The standard deduction rises to $6,200 for single taxpayers and married taxpayers filing separately. The standard deduction is $12,400 for married couples filing jointly and $9,100 for heads of household. Here’s how those rates compare to 2013:

Standard Deductions

Standard Deductions

Itemized Deductions. The limitation for itemized deductions – the Pease limitations, named after former Rep. Don Pease (D-OH) – claimed on individual returns for tax year 2014 will begin with incomes of $254,200 or more ($305,050 for married couples filing jointly). The Pease limitations were slated to be reduced beginning in 2006 and eliminated in 2010; as with the other tax cuts, the elimination was extended through the end of 2012. The limitations were brought back in 2013 at the original thresholds, indexed for inflation. The result of those changes is basically an increase in the top marginal tax rates.

Personal Exemptions. The personal exemption amount is $3,950 in 2014, up from $3,900 in 2013. Phase-outs for personal exemption amounts (sometimes called “PEP”) begin with adjusted gross incomes (AGI) of $254,200 for individuals and $305,050 for married couples filing jointly; the personal exemptions phase out completely at $376,700 for individual taxpayers ($427,550 for married couples filing jointly.)

Alternative Minimum Tax (AMT) Exemptions. The AMT exemption amount for tax year 2014 is $52,800 for individuals and $82,100 for married couples filing jointly. That compares to $51,900 and $80,800, respectively for 2013. In years past, the AMT was subject to a last minute scramble by Congress to “patch” the exemption but as part of the American Taxpayer Relief Act of 2012 (ATRA), the AMT is permanently adjusted for inflation – that’s why you see it in this list.

Earned Income Tax Credit (EITC). For 2014, the maximum EITC amount available is $3,304 for taxpayers filing jointly with one child; $5,460 for two children; $6,143 for three or more children and $496 for no children.

Child Tax Credit. For taxable years beginning in 2014, the value used to determine the amount of credit that may be refundable is $3,000 (the credit amount has not changed).

Kiddie Tax. For 2014, the threshold for the kiddie tax – meaning the amount a child can take home without paying any federal income tax – remains at $1,000.

Adoption Credit. For taxable years beginning in 2014, the credit allowed for an adoption of a child with special needs is $13,190; the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,190. Phase outs do apply beginning with MAGI in excess of $197,880.

Hope Scholarship Credit. In 2014, the Hope Scholarship Credit cannot exceed $2,500. The amount you can claim is equal to 100% of qualified tuition and related expenses not in excess of $2,000 plus 25% of those expenses in excess of $2,000 but not to exceed $4,000.

Flexible Spending Accounts. The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending accounts (FSA) remains at $2,500 for 2014.

Individual Retirement Account Contributions. The $5,500 limit on IRA contributions remains the same in 2014.

Federal Estate Tax Exemption. The exclusion amount for estates of decedents who die in 2014 is $5,340,000, up from a total of $5,250,000 in 2013.

Federal Gift Tax Exclusion. The annual exclusion for gifts remains at $14,000 for 2014.
Kelly Phillips

12 IRS Audit Red Flags

Here are twelve hot spots on your return that can raise the chances of scrutiny by the IRS.

Ever wonder why some tax returns are eyeballed by the Internal Revenue Service while most are ignored? The IRS audits only slightly more than 1% of all individual tax returns annually. The agency doesn’t have enough personnel and resources to examine each and every tax return filed during a year. And its resources are shrinking…the number of enforcement staff dropped nearly 6% last year, partly due to budget cuts. So the odds are pretty low that your return will be picked for review. And, of course, the only reason filers should worry about an audit is if they are fudging on their taxes .

However, the chances of being audited or otherwise hearing from the IRS increase depending upon various factors, including your income level, whether you omitted income, the types of deductions or losses you claimed, the business in which you’re engaged and whether you own foreign assets . Math errors may draw IRS inquiry, but they’ll rarely lead to a full-blown exam. Although there’s no sure way to avoid an IRS audit, you should be aware of red flags that could increase your chances of drawing unwanted attention from the IRS.

1. Making too much money

Although the overall individual audit rate is about 1.03%, the odds increase dramatically for higher-income filers. 2012 IRS statistics show that people with incomes of $200,000 or higher had an audit rate of 3.70%, or one out of every 27 returns. Report $1 million or more of income? There’s a one-in-eight chance your return will be audited. The audit rate drops significantly for filers making less than $200,000: Less than 1% (0.94%) of such returns was audited during 2012, and the vast majority of these exams were conducted by mail. We’re not saying you should try to make less money — everyone wants to be a millionaire. Just understand that the more income shown on your return, the more likely it is that you’ll be hearing from the IRS.

2. Failing to report all taxable income

The IRS gets copies of all 1099s and W-2s you receive, so make sure you report all required income on your return. IRS computers are pretty good at matching the numbers on the forms with the income shown on your return. A mismatch sends up a red flag and causes the IRS computers to spit out a bill. If you receive a 1099 showing income that isn’t yours or listing incorrect income, get the issuer to file a correct form with the IRS.

3. Taking large charitable deductions

We all know that charitable contributions are a great write-off and help you feel all warm and fuzzy inside. However, if your charitable deductions are disproportionately large compared with your income, it raises a red flag. That’s because IRS computers know what the average charitable donation is for folks at your income level. Also, if you don’t get an appraisal for donations of valuable property, or if you fail to file Form 8283 for donations over $500, the chances of audit increase. And if you’ve donated a conservation easement to a charity, chances are good that you’ll hear from the IRS. Be sure to keep all your supporting documents, including receipts for cash and property contributions made during the year, and abide by the documentation rules. And attach Form 8283 if required.

4. Claiming the home office deduction

Like Willie Sutton robbing banks (because that’s where the money is), the IRS is drawn to returns that claim home office write-offs because it has found great success knocking down the deduction and driving up the amount of tax collected for the government. If you qualify, you can deduct a percentage of your rent, real estate taxes, utilities, phone bills, insurance and other costs that are properly allocated to the home office. That’s a great deal. And beginning with 2013 returns, which will be filed in 2014, you have a simplified option for claiming this deduction. The write-off can be based on a standard rate of $5 per square foot of space used for business, with a maximum deduction of $1,500. To take advantage of this tax benefit, you must use the space exclusively and regularly as your principal place of business. That makes it difficult to successfully claim a guest bedroom or children’s playroom as a home office, even if you also use the space to do your work. “Exclusive use” means that a specific area of the home is used only for trade or business, not also for the family to watch TV at night. Don’t be afraid to take the home office deduction if you’re entitled to it. Risk of audit should not keep you from taking legitimate deductions. If you have it and can prove it, then use it.

5. Claiming rental losses

Normally, the passive loss rules prevent the deduction of rental real estate losses. But there are two important exceptions. If you actively participate in the renting of your property, you can deduct up to $25,000 of loss against your other income. But this $25,000 allowance phases out as adjusted gross income exceeds $100,000 and disappears entirely once your AGI reaches $150,000. A second exception applies to real estate professionals who spend more than 50% of their working hours and 750 or more hours each year materially participating in real estate as developers, brokers , landlords or the like. They can write off losses without limitation. But the IRS is scrutinizing rental real estate losses, especially those written off by taxpayers claiming to be real estate pros. The agency will check to see whether they worked the necessary hours, especially in cases of landlords whose day jobs are not in the real estate business.

6. Deducting business meals, travel and entertainment

Schedule C is a treasure trove of tax deductions for self-employeds. But it’s also a gold mine for IRS agents, who know from experience that self-employeds sometimes claim excessive deductions. History shows that most underreporting of income and overstating of deductions are done by those who are self-employed. And the IRS looks at both higher-grossing sole proprietorships and smaller ones. Big deductions for meals, travel and entertainment are always ripe for audit. A large write-off here will set off alarm bells, especially if the amount seems too high for the business . Agents are on the lookout for personal meals or claims that don’t satisfy the strict substantiation rules. To qualify for meal or entertainment deductions, you must keep detailed records that document for each expense the amount, the place, the people attending, the business purpose and the nature of the discussion or meeting. Also, you must keep receipts for expenditures over $75 or for any expense for lodging while traveling away from home. Without proper documentation, your deduction is toast.

7. Claiming 100% business use of a vehicle

Another area ripe for IRS review is use of a business vehicle . When you depreciate a car, you have to list on Form 4562 what percentage of its use during the year was for business. Claiming 100% business use of an automobile is red meat for IRS agents. They know that it’s extremely rare for an individual to actually use a vehicle 100% of the time for business, especially if no other vehicle is available for personal use. IRS agents are trained to focus on this issue and will scrutinize your records. Make sure you keep detailed mileage logs and precise calendar entries for the purpose of every road trip. Sloppy recordkeeping makes it easy for the revenue agent to disallow your deduction. As a reminder, if you use the IRS’ standard mileage rate, you can’t also claim actual expenses for maintenance, insurance and other out-of-pocket costs. The IRS has seen such shenanigans and is on the lookout for more.

8. Writing off a loss for a hobby activity

Your chances of “winning” the audit lottery increase if you have wage income and file a Schedule C with large losses. And if the loss-generating activity sounds like a hobby — horse breeding, car racing and such — the IRS pays even more attention. Agents are specially trained to sniff out those who improperly deduct hobby losses. Large Schedule C losses are always audit bait, but reporting losses from activities in which it looks like you’re having a good time all but guarantees IRS scrutiny You must report any income you earn from a hobby, and you can deduct expenses up to the level of that income. But the law bans writing off losses from a hobby. For you to claim a loss, your activity must be entered into and conducted with the reasonable expectation of making a profit. If your activity generates profit three out of every five years (or two out of seven years for horse breeding), the law presumes that you’re in business to make a profit, unless IRS establishes otherwise. If you’re audited, the IRS is going to make you prove you have a legitimate business and not a hobby. So make sure you run your activity in a businesslike manner and can provide supporting documents for all expenses.

9. Running a cash business

Small business owners , especially those in cash-intensive businesses — think taxis, car washes, bars, hair salons, restaurants and the like — are a tempting target for IRS auditors. Experience shows that those who receive primarily cash are less likely to accurately report all of their taxable income. The IRS has a guide for agents to use when auditing cash-intensive businesses, telling how to interview owners and noting various indicators of unreported income.

10. Failing to report a foreign bank account

The IRS is intensely interested in people with offshore accounts, especially those in tax havens, and tax authorities have had success getting foreign banks to disclose account information. The IRS has also used voluntary compliance programs to encourage folks with undisclosed foreign accounts to come clean — in exchange for reduced penalties. The IRS has learned a lot from these programs and has collected a boatload of money (we’re talking billions of dollars).

Failure to report a foreign bank account can lead to severe penalties, and the IRS has made this issue a top priority. Make sure that if you have any such accounts, you properly report them. This means filing Treasury Department Form 90-22.1 by June 30 to report foreign accounts that total over $10,000 at any time during the prior year. And those with lots more financial assets abroad may also have to attach IRS Form 8938 to their timely filed tax returns.

11. Engaging in currency transactions

The IRS gets many reports of cash transactions in excess of $10,000 involving banks, casinos, car dealers and other businesses, plus suspicious-activity reports from banks and disclosures of foreign accounts. A report by Treasury inspectors concluded that these currency transaction reports are a valuable source of audit leads for sniffing out unreported income. The IRS agrees, and it will make greater use of these forms in its audit process. So if you make large cash purchases or deposits, be prepared for IRS scrutiny. Also, be aware that banks and other institutions file reports on suspicious activities that appear to avoid the currency transaction rules (such as persons depositing $9,500 in cash one day and an additional $9,500 in cash two days later).

12. Taking higher-than-average deductions

If deductions on your return are disproportionately large compared with your income, the IRS may pull your return for review. But if you have the proper documentation for your deduction, don’t be afraid to claim it. There’s no reason to ever pay the IRS more tax than you actually owe

Joy Taylor