Does it sound like you have something to hide?
OT: Getting Audited by Uncle Sam - Advice?
Any advice from fellow mgobloggers on the process?
Also, I am a Detroit area resident and have decided that I should get professional representation - any recommendations?
Goal is to get this out of my hair as quickly as possible.
Sorry if too OT
Answered your own question. Go for professional representation who can analyze the details of your specific situation. Look for firms with reps who have IRS experience and you should be fine if you're not hiding anything. Might have to pay a fine.
And make sure you have your record keeping in order. One of the first pieces the IRS is going to ask for is your bank statements to make sure that you are not understating income. For example, if you've reported $90K in gross receipts, and there's $175K in deposits going through your accounts for the year, you better have a damn good explanation as to why.
Overstating deductions is one thing. Underreporting income is another matter altogether.
Best of luck.
Did you prepare your own tax returns, or did you hire an accountant? Is the IRS auditing a specific piece of your return, or your return in its entirety? (if you'd rather answer these in private I can provide an email address/you provide an email address)
Although unlikely, the IRS does pull people at random for an audit. So your selection may have nothing to do with anything you did: you may have just won the IRS lottery.
Accountant here as well. Paper audits are fairly common, even moreso with self-employed. Usually just want to verify a specific piece of the return. Wouldn't sweat it.
If its a full audit - If you hired a tax accountant to file your return, that would be the first place to start. they should represent you.
own taxes and mine are complicated. I made a mistake once on my 1040. I went back and forth with them. Finally after 6 months the supervisor called me to explain what was wrong. I made a math error....I did not carry the 1 literally. I owed $3000. They worked with me and even offered me a payment plan.
1) make sure you know why EXACTLY the reason they are auditing you.
2) Put everything in writing CMRCR when you communicate with the IRS.
3) If you dont understand the issue take it to whomever did your taxes. If they dont understand, get help.
4) If you do understand what happened, try to correct it. Work with them. NEVER ignore them. IRS does NOT need a court order to come and take your $hit.
Bottome line: If you are correct, stick to your guns. If you are wrong, cry, beg, plead, offer your Michigan Tickets....err nevermind. Keep your tickets, go to jail instead.
The IRS is friendlier but only to a point.
I think I am a lottery winner...I definitely report all my income, that is for sure.
Possibly overstate deductions. Mileage. We shall see.
uses statistics for most of their audits. Only a hand-full are pulled at random.
That funny little gadget called Standard Deviation is in play here. The IRS does not publish its auditing criteria but some believe that any deduction over about 2.7-2.9 sigma, gets a "hard" look.
Why do you think they ask you for your occupation on the 1040? So they can compare you to everyone else in that occupation. I always list my occupation as entrepreneur or capitalist instead of engineer. I have a friend that list pornographer.
He could be under-reporting his assets.
Getting representation is a good idea. If you have nothing to hide, then just lay everything out there. They audit folks at random, but based on a score for likely issues. In other words, vanilla returns are less likely to be audited. Being self-employed automatically makes you more likely to be audited. As long as you aren't hiding income or assets, you'll be fine. You may have to pay some, but they'll give you a payment plan. Be forthcoming. Be friendly. Don't screw around or waste their time. You'll be fine.
Not hiding anything, just something I'd rather not deal with!
Get representation. Listen to them. If and when you meet the auditor, do not tell the auditor that he is a complete s**thead and can go f**k himself. (I had a client who actually did that once. It didn't go well for them.)
Stop sweating it if you didn't do anything wrong. If you had an accountant or tax agency do your return then they should also provide support in any audit. These audits rarely result in a final determination. They will raise questions and you will have time beyond any face to face meeting to provide answers and or justify. Always keep good records especially when you are self employed. As you state you did nothing wrong so nothing to sweat. Right?
Definitely hire a professional. Parents owned their own business once and one year the IRS decided they were owed a specific amount. Parents checked all their work, proved they owed nothing, and the IRS relented. Next year the IRS said my parents owed them the equal amount, but from a different angle. My parents again went over their records, proved they owed nothing, and went on their way. The third time the IRS tried to get this same amount from my parents they pulled a Lance Armstrong, gave up, and paid it. It's a lot easier to hire a professional. They carry some weight that the IRS will respect.
In the AM. Nothing to hide, just another layer of stress as I'm trying to take my business to the next level.
Swear to god, it seems that being self employed just is not worth it these days.
I shave my head bald and still want the government out of my hair, go figure.
I just had a dispute with the State of Illinois IRS. As it turns out, I partially underpaid, but they also made errors. I provided documentation, laid out the math for what I needed to pay (about half what they calculated,) sent in a check, and that was the end of it.
One irony that mades me smile: your username, in juxtaposition with the statement, "Swear to god, it seems that being self employed just is not worth it these days." I won't take this far down the political road, but will merely observe that many of a particular political persuasion would fully agree with your assessment.
to see that "pulling a Lance Armstrong" was already used in the context of a story that broke two hours ago.
Okay, I'm glad you asked. This is what you need. A paper shreader, a few gallons of bleach, and 2 bags of hair. This will certainly take care of your problem.
Dont sell your hair to a wig shop, get Direct TV...
Time to call the Wolf.
Sorry. Sounds like you've got some sound advice, above. I've nothing to offer but a movie reference that really doesn't even fit.
Wait. You're supposed to report ALL your income? (Asking for a friend).
Eat lots of garlic, and don't brush your teeth. Roll around in some shit. THEN go in to see the IRS. Your audit will be over in no time, trust me.
Don't forget to grow out your beard and walk into the meeting with an unlabeled bottle of apple juice.
If he's in the sewage sucking business, too.
How bored are you?
Your story is very self rewarding and pitched with bravado is all
I actually thought it was an interesting, informative, and helpful story. No need to be a dick.
I was just messing around at 1 morning. No need to get all sensitive. It was very informative and good post. I will pretend you never said those mean things to me :)
I bet you hate it when the hero of an action movie gives a quip to the bad guys too.
thanks for sharing, however, I kept wondering if Dana was cute and were you gonna ask her out or something.......and then write it off as a business expense, ah, just kidding.
Also, I'm self-employed and read this thread intently and was thinking oh shit, I better have my paperwork straight, fucking taxes man.
I was joshing ya about the Dana thing.
I don't blame you for responding to that jerk-like response and neg-banging him for his comment. You took the time to share insight and help a fellow M Fan. good on ya buddy, keep it up and don't let some people bring you down or deter you from helping in the future.
SoCal is great isn't it? I know I love where I live.
So, incredibly long story short, have your shit together.
Maybe it's different in the USA but here you don't "win" audits. An audit is a process that is used to determine whether things are in order and often times done with no preconceived ideas about the outcome. It isn't a trial that is won or lost, simply an investigation of documentation. I'm not trying to be a jerk, I just haven't ever heard someone say they "won" an audit and wondered if things were different in the USA is all.
You're ruining the short story.
One thing to remember......depending upon the details of what they are looking for, if it is a small item that they claim you underreported, as crazy as it sounds it may be better to capitulate and write a check. The reason for doing this, depending on what and how much, is that they can start looking deeper and deeper and even if you are 100 percent right, it gets expensive when you are represented. The IRS will often settle just to get a small claim concluded.
In the future, if it is other than a very small business filing/personal filing, it may be cheaper to get a solid accountant to do your return.
My dad is sort of lazy, so he avoids complicated calculations while doing taxes. This, along with being self-employed, occasionally gets him audited. But among the calculations he avoids are complicated deductions. So the first time he got audited, his response involved pointing out that, while he hadn't paid enough on one thing, he got more than that back from deductions he hadn't taken. The IRS had to send him a check.
The second time, a bank reported investment income as regular income. So he had to prove the bank was wrong. But he was able to do that.
So, really, I'd be prepared and then go into it curious about what they think they found. Be prepared for them to be wrong or misinformed. I don't know how your interaction will go, but my parents' disputes were all resolved by mail.
Representation is probably a good idea if your finances are more complicated than you are trained to understand well.
Great to know an IRS agent is a fellow mgoblogger!
Thanks all for the advice... Confident that this will get sorted out and rather quickly
cooperative and do not be defensive in your interactions with them, and the chips will fall where they may.
and I had made a mistake in how I reported a few stock sales. I went through it all again, found out what I owed, acknowledged the mistake, and followed their instructions to fix it. It took a few weeks to hear back from them each time but it went okay. So my advice would be the obvious: run all of the numbers again, ask anyone you know for help, and don't worry. I have been told that the number of audits is up a lot in the past year or two so it is no longer rare to be audited.
The advice was great, but I read all of the posts and am now terrified of ever receiving such notice.
Will be hitting the xanax immediately, then a Bloody Mary. At least it's Friday.
I own my own business. I have had my personal returns audited twice and my business returns audited once. I guess in reality, my business was audited 3 times since the K-1 from the business was part of the personal return. My only advice is " Buclke Up"
IRS was not easy to work with. Of the three audits over a 5 year period my accountant was overly aggressive on mortagage interest deductions on the first return only. I got hit with the difference and a fairly hefty penalty. Since I had an accountant, I had him take care of things as my representative with the IRS (but then also part of the penalty). There were no findings on subsequent audits.
Since my initial audit I have received so many letters of inquiry that I am sick of the IRS. All the audit did was put me squarely on their radar. As Doug Karsh says "best-a-luck"
Personally I would contact a local accountant. If you are near Rochester I can vouch for Bill Estes (248) 651-9899. Being self employed you may even be missing deductions that you should be getting.
I have actually been audited twice, both times because I made stupid mistakes on my return. Sometimes its just a wrong number, or accidently using last years form that can get you pulled.
The corporate clients I work with get audited non stop.
I've been audited three times. Its not that big of a deal although it can be if you are deliberately hiding something. Once they find you did something wrong though, you're more likely to be audited in the future. I had to pay around 20k in fines etc because I undereported. I didn't do it on purpose, it was right in the middle of my divorce so it was just more fuel for the soul-sucking tire fire that was my life at that time. It wasn't pleasant, but it wasn't cause for all of the panic either. They have installment plans and all of that nonsense if you end up needing it. Best of luck to you.
Spoke with bill, he is my man now. Told me he would take it from here.
Awesome! Glad I could help.
Make sure you get your t-shirt.
Shouldn’t that read:
“ I got audited by the IRS and all I got TO KEEP was this lousy T-shirt!” ?