Dom dom dom!!! AUDIT! I said it, out loud. Trust me, it’s not like Beetlejuice, where if you say it 3x it shows up. We can talk about audit without that dreaded letter showing up.
When I got that letter last spring, I was like most people. I started sweating profusely, my stomach hurt, I was in a full blown panic attack.
What did they want from me? I don’t make any money? I don’t lie? Why are they doing this? I was a mess.
Then I called my mom. She quickly calmed me down, told me it wasn’t gonna be any big deal. So she said. I didn’t believe it, and was sure this was gonna kill me.
First I had to call them. That was the toughest decision to make. Just willing myself to pick up the phone and call them. Somehow I made excuses to do every other crappy thing on my to-do list I’d been putting off.
Wash the cat? Done. Clean the yard up of dog poop? Done. Get the oil changed? Done. Clean the baseboards? Done
So there I was like a week later, still hadn’t called, just sweating as I picked up the phone and dialed.
And you know what I found out?
The IRS is full of just regular folks doing their job. Folks like us. I talked to Eric, my trusted IRS partner, where we set up an appointment and he advised me of the things I needed to bring in. I was scared of the appointment but relieved that he didn’t sound like a jerk, and didn’t tell me I as horrible and would soon be wearing an orange jumpsuit.
So I gathered all my info and went to meet him a few weeks later. He was a super nice, a family guy with young kids, very easy to talk to, and very helpful. I asked him lots of questions since I’m self-employed and we went over things.
I was extremely grateful that I had done my excel sheet with all my expenses because it made it quite easy to show him where my write-offs came from. He informed me that I needed to make them a little bit more in depth, which I agreed to do, and we set another appointment for a month away.
I did as he asked and met with him again in a month to drop off my paperwork. Now my case is simple, I didn’t make much, and I didn’t have any huge red flags to go over. My meeting with him was always 30 min or less. He told me it would be a few months and he would have my results.
I met him about 3 months later to go over what he’d found. There were a few discrepancies, nothing major, no fines or huge totals owed. I set up a payment plan and Poof! It was all over. Just like that.
Yes it was stressful, yes it took some time, but no, it didn’t kill me. Here are some great tips to make your auditing experience easier and smooth.
- Don’t Ignore the Notice– Remember that part where I kept putting it off cuz I was scared. Well, that’s all fine and good, but I did call before the date on the form. If you ignore it altogether, don’t worry, they’ll find you. And it won’t be pretty. Just make the call and the appointment. It’s much easier than dealing with the repercussions of ignoring it.
- Don’t Lie– Whatever you do, don’t lie to the Federal Government. They are fully expecting to find mistakes on your taxes, heck that might be why you’re there. Things that are general mistakes, or assumed that you didn’t have the knowledge, made a clerical error, or just didn’t know, aren’t going to get you into trouble. I didn’t know that I couldn’t write off 100% of travel food expenses. It wasn’t a big deal, he just did an adjustment, and I learned something new. Lying will only make it worse, and lead to potential larger fines and even punishment.
- Organize Your Records– When you talk to the IRS agent, he/she will tell you what they’re looking for. What year(s) they need to look at. If you’re a terrible bookkeeper and it’s a mess, don’t be afraid to tell them. They will give you time to put together your stuff. And if you don’t have it, start re-creating the records. I didn’t have receipts for my travel records. I was terrified about this, as if he was going to berate me, for such stupidity. Luckily, every expense I wrote off, was on my business bank account records. I spent an entire day, making lists of each expenditure and totally them up for each month. Time-consuming? Yes, but not impossible. Don’t panic, most stuff we can re-create and even find among our paperwork
- Be Nice– This goes without saying. I had heard horror stories of mean, horrible agents. But that wasn’t my case. He was friendly, professional, and easy to deal with. Which is exactly how I was to him. He told me horror stories of dealing with difficult people and it’s a shame because they’re just doing their job. Besides what’s the statement, “you catch more flies with honey?” Just be nice and respectful and chances are you’ll be treated the same.
- Bring Copies of Documents– There will be paperwork, lots of it. But just bring copies. Chances are you won’t be receiving any of your paperwork back, so make sure and bring copies. Keep track of what’s been submitted and what hasn’t. I ended up making an excel sheet, (yes, you know I love excel) and making a list of things I needed to get, along with a check mark when I submitted it. Organization is key to a good audit.
- Consult an Attorney– if you run a substantial business, have failed to pay taxes, or have complicated tax issues, please consult an attorney. They can give you constructive advice on how to proceed, let you know about possible fines, and direct you in your search for documents and info. And you can hire an attorney to handle the entire situation for you. I wish I’d had that option, but I didn’t since I couldn’t afford it.
My biggest wish at the end of this article is that you realize that being audited isn’t the end of the world. Is there a chance they’ll find a mistake(s) or you’ll owe extra money? Sure. Are you going to be ordered into the orange jumpsuit at your meeting and taken away without saying goodbye to the family, probably not? While it’s certainly can be a trying time, you’re simply going thru something that almost every person will go thru at one point in your life. Take a deep breath and breath deep, cuz it’s gonna be ok.
