I have experienced the "horror" of an IRS audit. And lived to tell the tale. Way back in 2011, I switched positions from a high school English teacher to a self-employed freelance writer. Being a self-employed businessman meant I decided what Uncle Sam received before tax season. I assumed I was being overcautious. Tax time came, I filled out my info, sent the forms in and waited. And waited.
Arrival of my Audit
A slim manila envelope arrived in the mail and I happily assumed it was my tax return, which I thought modest but useful. It wasn't. It was a terse form letter informing me that I was being audited and to call the an IRS office located in Chicago.
Audits are fodder for cartoons and sitcoms. Up to that point my only experience with them was a vague memory of Homer Simpson tossing his crumpled return into a bin...only to have it fall in the bin marked AUDIT. Not exactly a well informed taxpayer, was I?
I retrieved all the records I could. Since my business is almost entirely through email, I had records of all payments and invoices. Since I ran a small business from home, some deductions I made (purchasing a new laptop, printer and other office supplies) skirted the line business and personal use. But I stuck with my guns.
With nightmares of low-security prisons dancing in my head, I even retained a reputable tax lawyer a week before the audit itself. Three hundred bucks later and I didn't feel any better. I poured over my return, highlighting sections I thought the IRS might find questionable.
The Day of Financial Reckoning
Then the day came. Nervous and sweating through my cotton dress shirt, I came prepared to the office and waited for my turn. I waited about forty-five minutes, growing more and more nervous. Maybe it wouldn't be a jail sentence. Maybe just a stiff fine that would drain my bank account. Did they still tar and feather citizens? Okay, that's an exaggeration, but you know what your imagination can do.
A young fellow who looked like he should be teaching a science class called me into a cramped office. He made small talk as he clicked and clacked on his keyboard. I remember the screen glaring off his glasses, making him looking strangely like that serial killer in the Sin City comics.
After a few seconds of clacking, he started firing questions at me. When did I leave my teaching position? Was I incorporated? A half-dozen other questions I couldn't remember. After five minutes, he handed me a form. It might as well have been in Greek, as nervous as I was.
"Am I in trouble?" I squeaked. Ladies and gentlemen, I really did say that.
He laughed. "You're fine. Audit's done. Like a Band-aid. We've got an algorithm that pops out unusual returns. Yours came up, but no worries." He put out his hand. I shook it, consciously of how sweaty mine must have been and that was that.
Heed my Tax Season Advice...
An audit is not a dissection of your life. In most cases it means no more than a small fine. Unless, of course, you cheat on your taxes. Those that do might get away with it for a few years. Maybe even a decade. But sooner or later your name will pop up when that algorithm crawls over your return. If you want to avoid a tax audit, be honest with your taxes. Hire an accountant instead of being cheap. And if you DO get audited, it's not the end of the world.
Unless, of course, you cheated on them.
Arrival of my Audit
A slim manila envelope arrived in the mail and I happily assumed it was my tax return, which I thought modest but useful. It wasn't. It was a terse form letter informing me that I was being audited and to call the an IRS office located in Chicago.
Audits are fodder for cartoons and sitcoms. Up to that point my only experience with them was a vague memory of Homer Simpson tossing his crumpled return into a bin...only to have it fall in the bin marked AUDIT. Not exactly a well informed taxpayer, was I?
I retrieved all the records I could. Since my business is almost entirely through email, I had records of all payments and invoices. Since I ran a small business from home, some deductions I made (purchasing a new laptop, printer and other office supplies) skirted the line business and personal use. But I stuck with my guns.
With nightmares of low-security prisons dancing in my head, I even retained a reputable tax lawyer a week before the audit itself. Three hundred bucks later and I didn't feel any better. I poured over my return, highlighting sections I thought the IRS might find questionable.
The Day of Financial Reckoning
Then the day came. Nervous and sweating through my cotton dress shirt, I came prepared to the office and waited for my turn. I waited about forty-five minutes, growing more and more nervous. Maybe it wouldn't be a jail sentence. Maybe just a stiff fine that would drain my bank account. Did they still tar and feather citizens? Okay, that's an exaggeration, but you know what your imagination can do.
A young fellow who looked like he should be teaching a science class called me into a cramped office. He made small talk as he clicked and clacked on his keyboard. I remember the screen glaring off his glasses, making him looking strangely like that serial killer in the Sin City comics.
After a few seconds of clacking, he started firing questions at me. When did I leave my teaching position? Was I incorporated? A half-dozen other questions I couldn't remember. After five minutes, he handed me a form. It might as well have been in Greek, as nervous as I was.
"Am I in trouble?" I squeaked. Ladies and gentlemen, I really did say that.
He laughed. "You're fine. Audit's done. Like a Band-aid. We've got an algorithm that pops out unusual returns. Yours came up, but no worries." He put out his hand. I shook it, consciously of how sweaty mine must have been and that was that.
Heed my Tax Season Advice...
An audit is not a dissection of your life. In most cases it means no more than a small fine. Unless, of course, you cheat on your taxes. Those that do might get away with it for a few years. Maybe even a decade. But sooner or later your name will pop up when that algorithm crawls over your return. If you want to avoid a tax audit, be honest with your taxes. Hire an accountant instead of being cheap. And if you DO get audited, it's not the end of the world.
Unless, of course, you cheated on them.
