1. Welcome to SportsJournalists.com, a friendly forum for discussing all things sports and journalism.

    Your voice is missing! You will need to register for a free account to get access to the following site features:
    • Reply to discussions and create your own threads.
    • Access to private conversations with other members.
    • Fewer ads.

    We hope to see you as a part of our community soon!

Tax audits

Discussion in 'Anything goes' started by BurnsWhenIPee, Mar 19, 2015.

  1. BurnsWhenIPee

    BurnsWhenIPee Well-Known Member

    Got notice yesterday my state is questioning my work-related expenses that I deducted from my income taxes from 3 years ago and they want all my receipts and a list of about 15 pieces of supporting documents within a month.

    I know I should have kept it all, but I'm sure I can't come up with all of it - maybe half of it would be ambitious. So obviously I'm freaking out.

    Beyond the obvious to keep everything tax related for 7 years or whatever, anyone been through this and have any advice? Be straight with them that I don't have it and pay the difference, get one of those tax settlement lawyers that are on the radio all the time, get what I can and give it to them, beg for mercy?

    The difference in my tax burden would only be a few hundred bucks, so I don't mind paying that to make it go away, but don't know if that would trigger additional audits of past and future years, federal audits and just a big PITA across the board.
  2. 93Devil

    93Devil Well-Known Member

    If you use bank and debit cards a lot, ask for your bank statements from those years and note your work expenses.

    If you have a rewards card, that also keeps a history for you.
  3. The Big Ragu

    The Big Ragu Moderator Staff Member

    Sorry, man.

    I have never been through an audit, but if I did I'd have my accountant (she revels in this stuff) right next to me. I don't know that I would try to face them down without her there.

    I do know that as intimidating as they are, you should push back a little. First, don't ignore the notice. ButI am sure you have a right to do this in a timeframe that works for you, not the timeframe they dictate to you. So if you need more time to prepare, I'd respond saying so. Be reasonable in what you tell them you need, but push back. And do respond.

    If it was me, I'd be prepared for the worst case: the additional taxes and penalty. But I wouldn't roll over. Be respectful of whoever you end up dealing with. If it is a small audit, my guess is that it all gets done without any face-to-face interaction. Just by mail or phone.

    If it really is a matter of having not kept receipts (and not a fudged return), go in stating that. 93 is right. Reconstruct whatever you can in whatever ways you can to document the expenses. Credit card statements are the obvious way. But if you have other legitimate expenses that you don't have a paper trail for, they are still legitimate expenses! You did nothing wrong. So swear out an affidavit (just tell the truth!) documenting the expenses you claimed -- on your word.

    I know this is intimidating, but I would try not to forget that you have more rights than whoever you end up dealing with -- even if he or she has unfair power to mess with you. At the end of the day, I'd guess they aren't all jerks. They are just doing a boring job. So be respectful. ... but resolute. Challenge -- respectfully -- anything they claim that isn't correct. They get things wrong. Don't say anything or put anything in writing that you are not certain about. If they come back to you with questions, buy time -- tell them you are not certain and you will have to get back to them.

    That is why I wouldn't personally ever go through this without an accountant I trust. He or she will recognize their end game, be able to speak their lingo, and when the accountant says you will need to get back to them on something, it is credible.

    But if you hire someone (don't have someone already) then it is really a financial decision. Figure out the penalty and back taxes you are facing, and balance it against the cost of the accountant. If it's close, you might want to give it a go on your own, and see if you can bring down what it will take to make them go away, on your own.

    Oh, and if they come back to you with a bill that you think is wrong, appeal. Be respectful -- but don't make it easy for them to take your money.
    cjericho likes this.
  4. Big Circus

    Big Circus Well-Known Member

    Absolutely find an accountant. Having someone on your side who is conversant in the tax process and up on his or her regulations is a must.
  5. The Big Ragu

    The Big Ragu Moderator Staff Member

    I'd agree with Big Circus. But if the cost of the accountant is going to is going to be greater than the back taxes and penalty you are looking at, it doesn't make sense to pay that person. Your base cases is the back taxes and penalty for a tax bill that would have been computed without the expenses you can't document. Come up with a rough estimate of that number and make a decision, by comparing that "worst case" against the cost of the accountant.
  6. BurnsWhenIPee

    BurnsWhenIPee Well-Known Member

    Thanks for the responses and pardon my ignorance, but would it be better to go with an accountant or a lawyer with a background in tax law?
  7. Amy

    Amy Well-Known Member

    A tax accountant should be able to handle this.

    When you consider the costs of additional tax, consider the cost if the same expense disallowance is picked up on your federal return. This sounds like a challenge to deductions in determining federal taxable income, which then flows through as the starting point on your state return.

    State departments of revenue and the IRS exchange audit information, so there is the chance the IRS will pick up this change (putting aside whether you have any legal obligation to file an amended return).
  8. RecoveringJournalist

    RecoveringJournalist Well-Known Member

    I'd get an attorney who will have you properly prepared for the audit and can advise you what to say or not to say. Even if you end up owing a lot to the IRS, the right attorney can negotiate that for you as well.
  9. MisterCreosote

    MisterCreosote Well-Known Member

    Don't most tax preparers, including Turbotax, offer audit defense services included in the filing price?

    I know H&R Block does.
  10. BurnsWhenIPee

    BurnsWhenIPee Well-Known Member

    I always do my taxes with the H&R Block computer program, and they do, too. I should check with them, but I think it's limited audit defense, like if it's a mistake that can be attributed to them, it's on them. But if it's user error, like the dumbass in question doesn't keep all his receipts and documentation for the next 7 years, it's on the dumbass.
  11. MisterCreosote

    MisterCreosote Well-Known Member

    I'm pretty sure they defend you, or at least advise you, regardless. IIRC, the distinction as to who's at fault only applies to who will pay the difference (i.e. if they made the mistake, they'll pay the back taxes).

    Either way, it's worth a shot.
  12. The Big Ragu

    The Big Ragu Moderator Staff Member

    I'd call H&R Block and ask. A guarantee in which they get to unilaterally decide what kind of audit is "their mistake" wouldn't be much of a guarantee. My bet is that they provide a rep for an audit if you use their software -- period. The chances of audits aren't that great, and then on top of it, not everyone is going to take advantage of the guarantee. So I am sure it's something that got factored into the cost of the software. I'd absolutely take advantage of it, if they provide you with a CPA, and let that person communicate for you.
Draft saved Draft deleted

Share This Page