twitter facebook stumble upon rss

10 Lessons I Learned from My Audit

sign up for the momlogic newsletter Tweet This

One mom shares her pain.

Woman with tax forms going over receipts

Guest Blogger Diane: Being audited was one of the worst experiences of my life. I am hoping that others can learn from my misery.

1. One thing I DID NOT KNOW was that the IRS does not accept credit card statements as a receipt. You have to have THE ORIGINAL RECEIPT. So even though I had my AmEx year-end summary, and my AmEx statements, the IRS wanted ALL ORIGINAL RECEIPTS. If you can't produce them, the expense will be disallowed.

This was probably the biggest lesson. For all of my business travel in 2007, the auditor made me go back and call every single hotel I'd been to and ask for original receipts. Very time-consuming.

Getting the paperwork together that they required took me up to 150 to 200 hours.

2. If you travel and write off any of it as business travel, you must have a travel log for each year detailing your business travel -- where you were, who you were with, and the purpose of the trip. They prefer that this information be submitted in calendar form.

3. If you write off any of your business miles, you must have a mileage log that lists, day by day, where you went and how many miles you traveled. (You can buy blank ones at Office Depot.)

The IRS required statements from my mechanic showing my odometer readings so they could see how many miles my car had on it in 2007, also.

4. If you are ever audited, they require all of your bank statements (checking and savings) for that year. Then they add up every single deposit and make sure you have reported all income. Even if it is off by $500, they will ask you where that $500 came from (in our case, holiday gifts). Intense!

5. They require EVERY SINGLE utility bill -- phone, electric, cable ... all of it. If you don't have these, it's a nightmare to try to get them from the companies. Talk about red tape!

6. Check out your accountant. Ours wasn't "enrolled" with the IRS (unbeknownst to us), and made a huge error that cost us thousands of dollars.

7. You are not allowed to have a TV in your home office. If you have children, they will question whether they use the computer or not. (I have been told that having a home office is a red flag for the IRS, but I'd had one for ten years prior with no problems.)

8. DO NOT TALK TO THE AUDITOR. Have your accountant represent you. They can use anything you say against you.

9. If they audit you for one year, they can also go into the preceding and succeeding years -- in my case, I was audited for 2007, but they also examined 2006 and 2008. They billed us for three years based on their findings in 2007.

10. Don't sign ANY bill from the IRS until you get a second opinion. Once you sign it, you owe it. (And if you owe the IRS more than $10,000, they can put a lien on your bank account and garnish your wages.)

I hope no one reading this article is ever audited ... but they say I was picked at random, so there are no guarantees. Good luck.

Here's more info on how to keep the IRS at bay.

next: N.J. Teacher Fined $22G for Personal Call in Class
28 comments so far | Post a comment now
Registro Publico de Panama January 31, 2011, 12:23 AM

Wonderful post - and good domain by the way!

Hotel Veneto Panama February 2, 2011, 2:51 AM

I usually don’t commonly post on many Blogs, however I just has to say thank you for %BLOGTITLE%… keep up the amazing work. Ok regrettably its time to get to my work.

panama real estate February 11, 2011, 12:31 PM

Kudos from one nerd to another. :)

panama real estate February 11, 2011, 6:48 PM

There is plain a good deal for me to discover outside of my course. Thanks for the fabulous read.

Cody Ostrom February 18, 2011, 3:19 PM

What would we do without the presence of the brilliant thoughts you talk about on this web site? Who else has the tolerance to deal with essential topics just for common visitors like me? I and my guys are very happy to have your site among the ones we usually visit. We hope you know how significantly we value your efforts! Best wishes through us all.

Pizza Panama February 26, 2011, 11:33 PM

I usually don’t ordinarily post on many Blogs, yet Thanks so much… keep up the amazing work. Ok unfortunately its time to get to school.

amazon offers March 9, 2011, 8:57 AM

Phenomenal post - and good domain by the way!

digital marketing agencies March 23, 2011, 6:22 AM

Thank you a lot for giving everyone remarkably special chance to read in detail from here. It can be so kind and as well , stuffed with a lot of fun for me and my office colleagues to search your site at the least three times in one week to read through the newest guidance you will have. And definitely, I’m also at all times impressed for the astounding creative ideas you serve. Certain 3 ideas in this posting are clearly the best we have ever had.

Back to top >>