Filing Schedule C, “Profit or Loss from Business,” is a critical part of tax compliance for sole proprietors and single-member LLCs. While it allows for significant deductions, it’s also a common area for errors and audits. The issues can be particularly complex for international taxpayers who must navigate both U.S. and foreign tax laws.

Common Issues for Domestic Taxpayers
For U. S.-based Schedule C filers, the most frequent issues often revolve around documentation, the proper classification of expenses, and avoiding “red flags” that can trigger an IRS audit.

These issues include:

1. Failure to Report All Income
2. Improper Expense Deductions
3. Deducting Personal Expenses
4. Exaggerated Deductions
5. Miscalculating Vehicle Expenses
6. Inadequate Documentation
7. “Hobby” vs. “Business” Losses
8. Errors in Math or Form Completion
9. Record Keeping in Cash Intensive Businesses

Common Issues for International Taxpayers
For U. S. citizens and resident aliens filing a Schedule C from abroad, the complexity increases. You must comply with U.S. tax laws on your worldwide income while also navigating foreign tax obligations and special exclusions.

Areas requiring attention include:

1. Currency Conversion to U. S. Dollars
2. Failure to File FBAR and FATCA forms for foreign bank accounts and assets
3. Misunderstanding Tax Exclusions and Credits
4. Lack of Foreign Documentation
5. Incorrect Worker Classification (in accordance with U. S./IRS classifications)

Please feel free to contact us if you have questions or need assistance with your Schedule C, or other tax forms.

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