America Financial
and Tax Services, Inc.
Services
Your Trusted Tax & Accounting Experts in San Diego — English & Español
From Bookkeeping to International Taxes, We’ve Got You Covered.
Managing your finances shouldn’t feel overwhelming. At America Financial & Tax Services, Inc., we provide professional, reliable, and personalized tax and accounting services for individuals, businesses, and entrepreneurs across San Diego — and beyond. Whether you need help with payroll, forming a corporation, resolving IRS issues, or navigating international tax laws, we make the process simple, stress-free, and understandable in English or Spanish.
Justice in the life and conduct of the State is possible only as first it resides in the hearts and souls of the citizens.
– Plato
Frequently Asked Questions
Below are some of the most frequently asked questions we get regarding our legal practice and services. If you have any other questions please contact us
Typical IRS Audit Paperwork Checklist
1. Identification & IRS Correspondence
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IRS audit notice (Letter 2205, 566, or similar)
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A copy of the tax return(s) being audited
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Government-issued photo ID
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Tax preparer’s contact information (if applicable)
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Any prior IRS correspondence about the same tax year
2. Income Verification
The IRS wants to confirm all income reported:
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W-2 forms (wages)
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1099 forms (freelance, interest, dividends, retirement, etc.)
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K-1 forms (partnerships, S-corps, trusts)
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Bank statements (checking, savings, investment accounts)
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Brokerage statements
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Pay stubs
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Rental income records (leases, payment receipts)
3. Expense & Deduction Support
Bring documentation for any deductions, credits, or expenses claimed:
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Receipts (dated, itemized)
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Invoices
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Cancelled checks
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Credit card statements
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Mileage logs (for vehicle deductions)
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Home office logs (square footage, expenses, utility bills)
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Charitable donation receipts (with 501(c)(3) info)
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Medical bills & proof of payment
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Tuition statements (Form 1098-T) and education expense receipts
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Childcare provider receipts and EIN/SSN
4. Business Records (if self-employed or own a business)
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General ledger / accounting software reports (QuickBooks, etc.)
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Profit & loss statements
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Balance sheets
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Bank account statements for the business
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Payroll records & tax filings (Forms 941, W-2, W-3)
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Business licenses
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Contracts & client invoices
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Inventory logs
5. Asset & Investment Records
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Purchase and sale documents for property, stocks, vehicles, or equipment
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Depreciation schedules
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Loan agreements & payment records
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Closing statements for real estate
6. Other Supporting Evidence
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Emails, contracts, or agreements that explain transactions
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Logs or calendars supporting business activities
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Any written explanations for unusual or one-time transactions
✅ Pro Tips:
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Organize by category and year — the cleaner your documentation, the faster the audit.
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Bring copies, not originals, unless the IRS specifically requests originals.
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Match each document to the tax return line item it supports.
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If you’re missing records, you can reconstruct them (bank statements, affidavits, etc.) — the IRS accepts reasonable reconstructions.
Forming an LLC is often a good idea because it separates your personal assets (your home, savings, etc.) from your business liabilities. That way, if your business is sued or owes money, creditors generally can’t go after your personal property.
Key Things to Know About Creating an LLC for a Home Business
1. It’s Legal in All States
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Every U.S. state allows home-based businesses to operate as an LLC.
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You’ll need to register the LLC with your state’s Secretary of State (or similar office).
2. Benefits for Home-Based Businesses
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Liability Protection – Your personal assets are separate from the business’s debts.
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Professional Image – Gives your home business a formal, credible structure.
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Tax Flexibility – You can choose to be taxed as a sole proprietor, partnership, S-corp, or C-corp.
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Easier to Bring in Partners – You can add members to the LLC.
3. Steps to Set It Up
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Choose an LLC name that follows your state’s rules (often must include “LLC”).
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Check local zoning rules — some cities/counties require permits for home businesses.
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File Articles of Organization with your state and pay the filing fee.
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Appoint a registered agent (can be you or a service).
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Create an Operating Agreement (even if you’re the only owner — helps protect your liability shield).
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Get an EIN (Employer Identification Number) from the IRS — free at IRS.gov.
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Open a separate business bank account (don’t mix personal and business money).
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Apply for any required licenses/permits for your business type.
4. Watch for Home-Based Rules
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Your lease, HOA, or local zoning laws may have limits on running a business from your home.
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Some businesses (food production, childcare, etc.) have extra health or safety requirements.
💡 Tip: Even if you’re the only owner, forming an LLC can protect you — but that protection only works if you keep your business and personal finances separate and follow all LLC compliance rules.
Think of it as “audit-proofing” your business:
Minimize risky signals + keep airtight records = peace of mind.
1. Keep Meticulous Records
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Save all receipts, invoices, contracts, bank statements (paper or digital).
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Use accounting software (QuickBooks, Wave, Xero) to track income & expenses.
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Keep mileage logs if you deduct vehicle use.
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Store digital backups of your records for at least 7 years (IRS statute of limitations is 3 years, but can be extended to 6+ for some cases).
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Maintain a separate business bank account — never mix personal and business funds.
2. File Clean, Accurate Returns
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Double-check math and spelling — simple mistakes can trigger closer review.
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Report all income (the IRS matches W-2s, 1099s, K-1s, etc. against your return).
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Be careful with round numbers — exact figures look more legitimate than “$10,000” everywhere.
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Avoid overstating deductions or claiming expenses that are partly personal.
3. Avoid Common IRS Red Flags
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High deductions compared to income — especially for meals, travel, home office.
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Large cash transactions (banks report over $10,000 to the IRS).
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Repeated business losses (3 years in a row can make the IRS question if it’s a hobby).
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Industry-specific scrutiny — construction, restaurants, consulting, and cash-heavy businesses are more likely to be audited.
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Not filing or filing late — automatically increases your audit risk.
4. Stay Compliant Year-Round
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File and pay quarterly estimated taxes if required.
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Issue 1099-NECs to contractors by the January deadline.
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Keep up with state business licenses and permits.
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If you have employees, submit payroll taxes on time.
5. Work With a Tax Pro
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Have a CPA or enrolled agent review your returns before filing.
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A pro can make sure deductions are legitimate and documented.
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Many tax pros offer IRS audit defense services — they’ll represent you if you’re audited.
✅ Bottom line:
You can’t make yourself invisible to the IRS, but you can make your business look like the least interesting target in the pile — and be fully ready to defend yourself if your number comes up.
When You Must File
You generally only have a U.S. tax filing obligation if at least one of these applies:
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You are a U.S. citizen or green card holder – The U.S. taxes citizens and permanent residents on worldwide income, no matter where they live or earn it.
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You have U.S.-source income – Examples:
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Wages from a U.S. employer
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Rental income from U.S. property
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Dividends/interest from U.S. investments
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You meet a filing requirement for other reasons – Such as self-employment income over $400 (even from abroad), advance premium tax credit reconciliation, or certain reporting forms like FBAR or FATCA (Form 8938).
When You Can File Voluntarily
Even if you don’t have to file, you might want to if:
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You qualify for a refund of U.S. tax withheld (on dividends, wages, etc.).
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You need an official record for immigration, mortgage, or financial purposes.
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You want to start the statute of limitations on an old tax year (filing protects you from future assessments for that year).
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You want to claim certain credits like the Child Tax Credit (if eligible).
Special Considerations if Living Abroad
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If you are a U.S. citizen abroad with foreign income, you may qualify for the Foreign Earned Income Exclusion (Form 2555) or Foreign Tax Credit (Form 1116) to reduce or eliminate U.S. tax.
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You may have extra forms (FBAR, FATCA) if your foreign bank accounts exceed certain thresholds.
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Filing deadlines are automatically extended to June 15 for U.S. taxpayers abroad, but interest on any taxes owed still starts April 15.
✅ Bottom line:
If you are not a U.S. citizen, green card holder, or have no U.S. income, you usually don’t need to file — but certain situations make it smart or necessary.
The “best” business structure really depends on your goals, risk tolerance, tax situation, and growth plans.
An LLC and a corporation each have strengths, but they suit different types of entrepreneurs.
Here’s the breakdown so you can match it to your situation:
1. LLC (Limited Liability Company)
Best for: Small to medium businesses, solopreneurs, home-based businesses, and partnerships that want flexibility and simplicity.
Pros:
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Easy to set up and maintain compared to a corporation.
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Flexible taxation – by default, profits pass through to your personal return (no corporate tax), but you can elect S-corp status to save on self-employment tax.
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Fewer formalities – no annual shareholder meetings or complex record-keeping requirements.
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Personal liability protection – your personal assets are generally safe if the business is sued.
Cons:
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Some states charge high annual fees for LLCs (e.g., CA has an $800 annual tax).
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Raising outside investor capital is harder — many venture capitalists prefer corporations.
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Profits are usually subject to self-employment tax unless you elect S-corp taxation.
2. Corporation (C-Corp or S-Corp)
Best for: Businesses planning to raise significant investment, issue stock, or expand nationally/internationally.
Pros:
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Easier to attract investors — corporations can issue stock.
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Clear ownership structure — helpful if multiple founders or complex equity plans.
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Potential tax advantages if profits are reinvested into the company.
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S-Corp option can reduce self-employment tax for small business owners (if you meet requirements).
Cons:
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More paperwork & formalities — annual meetings, bylaws, board minutes, stock records.
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Double taxation for C-Corps — corporation pays tax on profits, and shareholders pay tax on dividends (S-Corps avoid this, but have eligibility limits).
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Less flexible profit distribution — must be proportional to share ownership.
Quick Decision Guide
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✅ LLC → If you want flexibility, simple compliance, and personal liability protection for a smaller or lifestyle business.
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✅ S-Corp (either LLC taxed as S-Corp or incorporated S-Corp) → If you want liability protection + lower self-employment taxes.
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✅ C-Corp → If you plan to seek investors, go public, or reinvest heavily into the company.
💡 Pro Tip: Many business owners start as an LLC, then convert to an S-Corp or C-Corp later when growth and funding needs change. This keeps costs and complexity low in the early stages.
Let’s Take the Stress Out of Your Finances — Starting Today.
Call us now at 619.228.9122 or click below to schedule your Consultation, or email us at
Ask for Maria Elena Lara
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In person session are available by appointment at:
2727 Camino Del Rio South Suite 236, San Diego, CA 92108