Hey, If you are just joining us, each week I am releasing a Tax Tip Tuesday through December 1, 2017.
This week I want to talk about audits, any agency audits. (IRS, State, TTB, ABC)
Tense? I know.
But it doesn’t have to be.
Getting audited a real fear for some people. Having personally walked my customers through 25 state and 10 federal audits, I am here to tell you, they are not that bad.
Well, there was that one time……the auditor basically handed my customer an adjustment that would have closed his business. The auditor had no basis, he was a bully. Long story short, we fought it all the way up to the Tax Court appeal, and won.
I guess they can be scary.
I am here today to set the record straight on audits and share 5 common MYTHS about audits
A auditor’s sole purpose is to close your business and lock you in jail.
First and foremost, auditors are human. Second, their purpose is to enforce the laws of their agency. Treat them as you would treat a customer. If you follow the rules and keep good records, the process should be easy. Less organized businesses will have a harder time producing the documentation necessary to complete the audit, but in 99% of cases, no one is going to jail.
If I file an extension, I have a higher chance of getting audited.
I hear this all the time, it’s balagona. Submission date of your return has zero correlation to you getting audited. An extension is a valid request from any agency to allow more time to gather your info. If you 100% can not live with an extension, tell your tax preparer that you suffer from control issues and would like to file on time. He will understand.
I got a refund, I am in the clear.
A refund simply means that the agency has agreed with your calculations. It does not mean that you are in the clear for an audit. If an audit arises you will need to have all the support you used in your calculations.
If you use a CPA, you won’t get audited
Ha, wish this was true but it’s not. I know this first hand. Using a CPA or professional tax preparer should help you get the calculations right. From my experience, audits are selected at random. Agencies pick a tax form or tax type to focus on and if you are picked I am positive it was at random. Now, the random aspect flies out the window if you are a repeat offender. What I mean is, if you stop paying payroll tax or sales tax, and start receiving notices, there is a higher probability you will get audited. They will want to take a look under the hood.
More deductions and credits means higher likelihood of an audit.
Total myth. These are placed in the tax code for you to use….if you are eligible. The brewing industry is ripe with deductions and credits available to reduce your tax liability. We take these very seriously and have saved our tax customers hundreds of thousands in taxes by maximizing these items. We make sure to have the proper documentation and support for all our positions and have had zero issues by taking these.
Next week I dive, head first, into deductions and credits.
It’s gonna be Bling, Bada, Boom!
-cf
Got a tax question? Let me know here