Have you ever been audited?

[alkemyst]

Originally posted by: Lalakai
someone had asked about type of records to keep, and what might trigger an audit.

type of records would include everything that you use related to tax information. when i was audited i had a small business that i ran from my house, so i used some of the deductions from the house. i had calulations on square foot of room, then used that in relation of portions of expenses that were deducted. Mileage logs recorded date, destination, start and stop mileage; if used for trainings, the recipts for the trainings were cross referenced to the mileage logs. Meticulous and overkill??? lol not after being audited. Once the auditor started seeing the details in the records (highlighted line items in phone bills, highlighted items on CC's, ect), then she would jump to a different area.

And yes i do think they almost run on a type of "quota" system for the amount of money that they receive due to finding errors. My auditor wasn't antagonistic, but extremely thorough and wanted to see the smallest records and documents. Fortunately i had them and they were fairly well organized. Like i said earlier, the only thing she found was an inconsistancy on the mileage logs and that was due to my wife recording her mileage in a different book. When i got home after the audit (and having to pay a minor amount), i found the missing logs and was real tempted to go back and file an errors and omissions, but the amount was small and the auditor had been pretty decent through it all, so i just chalked it up to experience.

What triggers it? Small personal businesses are always high on their hit list, especially if you run it from your home. Auditors tend to shy away from the larger businesses because they are significantly more complex and the auditors "cost:benefit" ratio drops due to the amount of time they have to spend. And that old axiom: if it's too good to be true......it probably isn't; if you suddenly find that you are eligible for a huge unexpected tax return, make sure your numbers are good because that same sense of unexpectedness will also register with the IRS and make you more likely to get an audit.

Small businesses are usually fabricated. Larger business are documented. This is why small business audits happen. Most are fakes.

 

[Descartes]

Yes. I'm going through one now actually. It's close to being completed. It's a tremendous pain in my ass, and I had to pay my accounting people thousands of dollars in the process.

The only recommendation I have is to be sure you have a proper team behind you if you do get audited, and be sure that your CPA is thorough and keeps proper records (as well as you).

 

[Squisher]

Yes, the company that we had to go through to sell my wife's stocks did the worst job ever reporting the transaction.

If you looked at what they reported to the IRS you'd have thought the stocks fell out of the sky, we found them laying on the street, and then we sold them.

No cost basis, no reporting of fees, no showing of taxes paid, nothing.

Thank goodness we can go through any broker now.


But, that was the only focus of the audit. I would have thought they would have opened up our whole return which was pretty large that year, but they didn't.

 

[SampSon]

Audited by who and for what reason?