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Learn how to handle IRS notices in Norman, OK. Get expert guidance on notice types, proper responses, and when to seek professional help for resolution.

A cash-intensive business is one that receives a large portion of its revenues in cash , rather than checks, credit cards, or electronic payments. These businesses often raise red flags for tax authorities (like the IRS) because cash transactions are harder to trace , making them more susceptible to underreporting income, money laundering, or tax evasion . Common Examples of Cash-Intensive Businesses: 

If you're a real estate professional under IRS rules, there are significant tax advantages, especially around how real estate losses are treated. But to qualify and benefit, you must meet strict material participation requirements. Here's a clear breakdown of what real estate professionals need to know: What Is a “Real Estate Professional”? Who is a real estate professional: Meets BOTH of the following criteria: 1. More than 50% of your personal services during the tax year are in real property trades or businesses in which you materially participate. 2. You spend more than 750 hours during the tax year on those real property businesses. Both tests must be met every year you want to claim the status. What Qualifies as Real Property Trades or Businesses? These include: Real estate development Construction or reconstruction Acquisition or conversion Rental or leasing Property management Brokerage (but not just being a licensed agent—actual trade counts) Key Benefit: Rental Losses Become Non-Passive Normally, rental real estate losses are passive and can only offset passive income (unless you qualify for the $25K active participation rule). But if you're a qualified real estate professional, rental losses become active, and you can: Deduct them against W-2 income, business income, or capital gains Reduce your taxable income by potentially tens of thousands per year Material Participation Rules You must also materially participate in each rental activity unless you group them (see below). Material participation generally means: You work 500+ hours on the activity, or You are the only person substantially involved, or You participate more than anyone else Aggregation Election (Very Important) You can elect to group multiple rental properties as a single activity for purposes of meeting the participation threshold. Otherwise, you'd need to prove material participation for each property individually. To do this: File an election statement with your tax return. Once made, the election applies to all future years unless you revoke it with IRS approval. Documentation Is Critical The IRS scrutinizes this status heavily. You should: Track time daily or weekly: Keep a log of hours, tasks, and roles Document both real estate and non-real estate work (to prove the 50% rule) Be ready to show calendar entries, emails, contracts, and invoices Common Pitfalls to Avoid Mistake Why it’s a problem Not keeping time logs IRS may disallow the status Relying too much on property managers Undermines material participation Mixing W-2 jobs with real estate hours Can jeopardize the 50% test Failing to make aggregation election Harder to meet participation tests Summary: What You Need to Know Requirement Details 50%+ of your work Must be in real property trades 750+ hours/year In real estate, with documentation Material participation In each activity or grouped Annual test Must qualify every year Tax benefit Convert passive rental losses into deductions against ordinary income

Discover what defines quality tax services in Yukon, OK. Learn key indicators of professional tax preparation and how to find providers who add real value.

Common Tax Audit Triggers and What You Need To Know  Tax audits can be stressful, especially for small businesses with limited resources. While most businesses aren’t randomly selected for an audit, certain behaviors and patterns can trigger IRS scrutiny. Here's a breakdown of common tax audit triggers for small businesses : 1. Excessive Deductions Relative to Income If your deductions (e.g. travel, meals, home office) seem disproportionately high compared to your business income, it raises red flags. Example: Reporting $50,000 in income with $40,000 in travel expenses. IRS suspicion: You may be masking personal expenses as business-related. 2. Consistently Reporting Business Losses Showing a net loss year after year can lead the IRS to question whether you're running a legitimate business or a hobby (which has limited deductibility). IRS Rule: If you don’t show a profit in 3 of the last 5 years, they may reclassify your business as a hobby. 3. High Cash Transactions Businesses that primarily operate in cash (e.g., restaurants, salons, auto detailing) are more likely to be audited due to underreporting risks. Form 8300: You must report cash payments over $10,000. 4. Misclassification of Employees as Independent Contractors Misclassifying workers to avoid payroll taxes is a common audit trigger. IRS Test: Looks at control, financial arrangement, and relationship type. Consequence: You could owe back taxes, penalties, and interest. 5. Large or Unusual Charitable Deductions Donating large sums compared to your income may appear suspicious unless well-documented. What to do: Keep proper receipts and file Form 8283 for non-cash donations over $500. 6. Home Office Deductions Home office write-offs are legitimate but often abused. Rule: The space must be regularly and exclusively used for business. Red flag: Claiming 50% of your home as office space. 7. Round Numbers and Math Errors Returns with neatly rounded numbers or simple math mistakes may prompt closer review. Tip: Use software or a tax professional to avoid mistakes. 8. Discrepancies in 1099s and W-2s If what you report doesn’t match the forms submitted by clients or contractors, the IRS gets alerted automatically. Best practice: Reconcile your reported income with third-party forms. 9. Rapid Growth or Industry Outliers Reporting a sudden spike in income or expenses compared to prior years or industry averages can trigger a deeper look. IRS databases: Compare your ratios to industry norms. 10. International Transactions or Foreign Accounts Businesses with overseas transactions or accounts (FBAR, FATCA) are more complex and prone to scrutiny. You must report: Foreign accounts over $10,000 using FinCEN Form 114. 11.Amending Past Returns Frequently Frequent amendments can give the appearance of carelessness or manipulation. Tip: File accurately the first time. Amend only when truly necessary and explain changes clearly. What Should You Do To Stay Audit-Ready Keep organized records and receipts Use reputable accounting software Consult a CPA or enrolled agent Be honest and consistent in your filings

Business vs. Hobby; Which Does Your Business Qualify As? The " activity for profit test " is a concept primarily used in tax law , particularly in the U.S., to determine whether an activity is engaged in with the intent to make a profit —which affects whether the taxpayer can deduct related expenses. This test is most often applied by the IRS when deciding if an activity is a business or a hobby under Internal Revenue Code (IRC) Section 183, known as the “ hobby loss rule. ” Purpose: To determine whether the taxpayer's activity qualifies as a business (allowing deductions for losses) or a hobby (where deductions are limited). Key Factors (from IRS regulations) There is no single test, but the IRS looks at 9 factors to evaluate whether an activity is carried on for profit: Manner in which the taxpayer carries on the activity Is it run in a businesslike manner with complete and accurate records? Expertise of the taxpayer or their advisors Has the taxpayer studied the business or consulted experts? Time and effort expended on the activity Significant time investment suggests a profit motive. Expectation that assets used in activity may appreciate Profit may come from asset appreciation, not just operations Success in carrying on other similar or dissimilar activities Past success in similar ventures supports profit motive. History of income or losses Consistent losses may suggest your business is a hobby, though not always. Amount of occasional profits, if any Substantial profits, even infrequent, may suggest a business. Financial status of the taxpayer If the taxpayer has other income, this may indicate the activity is not essential for profit. Elements of personal pleasure or recreation If the activity is also enjoyable or recreational, it may be a hobby. Presumption of Profit Motive: The IRS presumes an activity is engaged in for profit if it produces a profit in at least 3 of the last 5 tax years , including the current year. For horse-related activities, it’s 2 out of 7 years . Example: Business: A freelance photographer markets services, keeps books, updates equipment, and earns profits in some years. Hobby: A person who takes photos occasionally, doesn’t advertise, and consistently loses money while enjoying the process.

1. Complex Tax Rules Real estate has unique tax benefits (like depreciation, 1031 exchanges, and passive loss rules). These often reduce taxable income significantly, which invites IRS interest. 2. High Potential for Abuse Real estate is often used for tax sheltering — legally or aggressively. Some people stretch the rules, especially around: Passive vs. active income Real estate professional status Overstated deductions Undeclared income (especially short-term rentals) 3. Frequent Red Flags  Common red flags in real estate filings: Large losses year after year High depreciation deductions Claiming personal expenses as business costs Frequent 1031 exchanges Not reporting rental or Airbnb income

Here are the top 10 U.S. states with the highest combined wireless service tax/fee/surcharge rates (state‐local + federal), as of July 2025 according to the Tax Foundation.