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Keep production activities in line

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in Small Business Tax

The IRS is on the prowl for excessive or illegitimate Sec. 199 “manufacturing” deductions.

A new Industry Directive on Domestic Production Deduction (DPD) warns IRS examiners about deductions claimed by a service-based business or a retailer that typically doesn’t produce the goods that it sells. (LMSB-04-1206-018)

Another red flag: when the alleged production income exceeds the taxpayer’s gross receipts.

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