Have you ever had your taxes audited? Did you understand what the trigger was?
I have never had my personal taxes audited, but when I was a consultant the state audited my business records. When I got the letter I called my lawyer who laughed and said that the state audits 2% of the companies every year and I was probably one of the lucky ones. When I called the auditor we spoke for a while and then he said: “You haven’t asked the first question that everyone asks: Why me?” I laughed and told him what my lawyer said and the auditor replied that my lawyer was dead-on, it was chance.
Yes. I’ve had several insurance audits (liability insurance for a business) and the (then) Texas Employment Commission audited a different business of mine. None of those were a major sweat.
The I.R.S. audited my personal taxes for three consecutive years (all at once). The flag was, I believe, that the business was the taxicab that put me through college and I managed to sell it after a few years of it leading the hard street life of a taxi for more than I’d originally paid for it.
Boy am I glad I kept all those hundreds of receipts. It was slightly confrontational, but my college girlfriend had just dumped me a couple of days before, and I think my only-halway-present state of mind might’ve worked to my advantage.
Anyway, I’d handled the depreciation and capital gain correctly, so I wound up with no additional payment to make. It took a couple of days.
I don’t know if this is still a policy in effect or not, but a friend who worked for the I.R.S. at the time told me that the quick arrival of my refund check (a few days after having filed on April 15th) was a good indicator an audit was coming, as the rule then was that the tax business for any year in question had to be completed before the audit.
I was audited in 1973. I had listed more medical deductions than the amount of my earnings for the year. I can certainly understand why that looked suspicious.
I had all my records in good order, with receipts and canceled checks that proved that I had indeed spent more on doctors and hospitals than my total earnings. Thank God I had some savings to tide me through.
The auditor was pleasant and businesslike, and the entire experience, while not enjoyable, was not nearly as scary as I had anticipated.
My business was audited a while back. They claim it was random, but as it turns out, the guy let it slip that my accountant had screwed up an addition which changed the amount of tax I should’ve paid.
It was awfully stressful. It was my first (and as it turns out, only) year in business and I was terrified he’d shut me down over something that amounted to an accounting error. It didn’t help, either, that I started having seizures at around the same time that this audit happened, so I wasn’t able to work, was having problems walking without getting dizzy and certainly wasn’t able to think straight as he interrogated me over and over about missing fuel receipts. I was terrifically stressed over money, and this wasn’t helping matters.
Finally, I think he realised I wasn’t all there and just issued me with instructions to fix the problem, and left me to my own devices. I just told the accountant to take care of it, and the tax department issued me with a bill for the outstanding amount ($70, which I couldn’t afford, due to the aforementioned inability to work).
I was personally audited twice, and then audited once on the job. The job one was triggered by inappropriate spending in certain places of the administration. Mine turned out to be only an audit of petty cash and not the main accounts. I knew everything would check out, but it still made me sweat. No warning either, the auditor just knocked on my office door and said Show me the Money! So I did, and all was well. That was last year.
My first personal experience was in 1992. I was a full time college student and working part time as a bartender. I made only about 4K for the entire year. The reason I was audited was because I didn’t declare my tips, which at the time was 8%. Whoops. I think I owed something like $500 and they let me make payments. I remember being so annoyed that they would come after someone who made so little money…What a scofflaw I am. The second time was in 1995. I think that was because my wages dramatically increased, as I had finished college and had my first “real” job. I was also still bartending, but by then I was declaring tips. That time my audit was clean. Someone once told me that if you have been audited once, you are put in a separate pool of people that are more likely to be audited again. I have no idea if this is true, though.
I haven’t been audited yet but I’m waiting … 2004 turned out to be the last year you were able to donate a car to a charity and take a fair market price as a deduction for it. Guess who donated two cars to charity in 2004.
I do believe we deducted a perfectly reasonable amount for the cars, but it’s hard to prove, so I see why the rule is changing (from now on you’ll only be able to deduct the actual price the charity gets for the car if they sell it. If the car is to be retained and used by the charity in its work, then you can take a fair market price).
Slightly off-topic, here, but one of my sisters worked for the IRS for several years. Part of her job was to notify people that they were being audited. She said two or three people each year committed suicide right after she contacted them, either the same day or the next day. She was on the phone with one guy when he shot himself. It was quite a depressing job, according to her.
Wow! Depressing indeed. I can’t even imagine it. The first one would have freaked me out enough that I’m sure I’d have started looking for a new job right away.