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Thread: I'm being audited

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    God/dess scarlett_vancouver's Avatar
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    Default I'm being audited

    meh.

    It's not a big deal, as I claim honestly and have all my paperwork/receipts, but I'm just annoyed...I SO don't have time for this. I now have HOURS of photocopying and spreadsheeting to do.

    Ugh.

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    Banned Melonie's Avatar
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    Default Re: I'm being audited

    Audits suck. At least you DO have previous years' tax returns, orderly records of your earnings and expenses etc.

  3. #3
    Sitri
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    Default Re: I'm being audited

    Remember to distract them with the toe stand while being audited. Also, wear old torn clothes and remind them how poor you are.

    Good luck...

  4. #4
    madmaxine
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    Default Re: I'm being audited

    Uh oh. You seem to have your act together and they got you. Dancers beware. If Scarlett can get audited, so can you.

    I HATE to advise women to use tears to get out of trouble, but hey,of all people, you don't deserve a hassle. Wear a short skirt, no mascara, and tell them about your heroic PAINFUL bout with mononuelcosis that did not stop your from finishing your degree. And the Peace Corps is waiting for your callback, dang it! (Violins playing.....)
    Good luck sweety.

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    Default Re: I'm being audited

    Yeah, sorry to hear of this, dear. You sound very organized, tho, unlike moi. Best of luck to you, I'm sure you'll do great. Do you know anyone w/any legal knowledge that can assist you? I myself use nolo.com for my legal issues.


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    Featured Member Lizette's Avatar
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    Default Re: I'm being audited

    Do keep up posted about the process. When I was audited for the year I didn't work, all I had to do was prove that I didn't work, which was pretty easy. I'm curious how the audit process goes for years that you do work.

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    Banned Melonie's Avatar
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    Default Re: I'm being audited

    From my own experiences with audits, a key factor is how organized and professional your financial records APPEAR to be. As I' ve stated many times, the major vulnerability of any independent contractor business in a service industry (be it dancing, gardening, or hair styling) is that essentially the ONLY documentation of how much money was actually earned is self-generated. Thus if the person maintains meticulous chronological records of earnings and expenses, i.e. records showing every night you worked, how much was earned that night, and what the related expenses were, it implies much more credibility than simply filling in a total income figure for the entire year, total deductions for the year etc. on Schedule C which are only backed up by the 'word' of the dancer and a disorganized bag full of receipts. If the person has also kept previous year tax returns and financial data in an organized manner, and has made estimated tax payments for the current year in an organized manner, this implies even more credibility.

    Where an auditor is concerned, having a financial log of specific night by night earnings and expenses is rather difficult to dispute. On the other hand, where an auditor is concerned, having only a Schedule C entry of say $75,000 total income is easy to question ... what proof is there that the actual income wasn't $100,000 or $150,000 ? ... what proof is there that the person only worked 150 nights last year instead of 200 nights or 250 nights ? With no third party corobboration of actual earnings (i.e no employer pay stubs proving how much money was actually earned or not earned), the credibility of one's financial records is extremely important.

    Also, the lack of a financial log of specific night by night earnings and expenses can prompt an auditor to start looking farther afield for other forms of income corroboration - for example requesting to look at the dancer's overall bank account deposits and withdrawls - or requesting to look at the dancer's credit card statements - or requesting to look at the dancer's rent/mortgage payments, utility bills etc - in an attempt to determine actual levels of 'cash flow' to compare against the dancer's reported income. Lack of previous years' tax returns and financial data and lack of estimated tax payments for the current year only serve to further prompt the auditor to look farther afield for other forms of income corroboration.

    In general, if the auditor gets the general impression that the person being audited is conducting her business in a straightforward and professional manner, and her self-generated business records appear straightforward and professional, and her handling of income tax filings/estimated tax payments tend to confirm that impression, then the auditor is quite likely to accept the financial figures shown in those records at face value. On the other hand, if the auditor gets the general impression that the person being audited is paying little or no attention to tax filing or financial record keeping, then the auditor is much more likely to question the accuracy / credibility of the person being audited - as well as being much more likely to suspect that significant amounts of unreported income might exist.
    ~
    Last edited by Melonie; 10-22-2005 at 10:51 PM.

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    God/dess Deogol's Avatar
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    Default Re: I'm being audited

    ^^^^ Ya outta type up some nightly worksheets. Blanks for income with blanks for expenses - dresses, makeup, etc. Each night worked one would simply fill out the worksheets and stick em in a binder. One could staple receipts to each worksheet. The bottom of the work sheets would have running totals to add to the previous worksheet.

    I don't think a dancer needs a full blown journal of accounts with quicken or something (though it might be smarter to do that.) But it would be something.

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    God/dess scarlett_vancouver's Avatar
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    Default Re: I'm being audited

    I'm pretty sure I'll be OK. I work weekly contracts where I'm paid by the club- I have all my paper contracts with my gross pay listed.

    It turns out I was flagged because of some work I did on the L Word- I guess I was an employee for the 3 days I worked for them, and was supposed to claim that seperately, but I didn't realize, I included it in my self-employment pay and treated it the same way.

    It all evens out though, so it seems I just need to send in all my documentation and I will hopefully be able to avoid a face-to-face. I hope. Sucks though, I'm not even partway done and I've scanned and printed 20 pages.

    My auditor contact is a lady, so no short skirts and tears, lol. I'm just going to be really professional about it. Just makes me so glad I file honestly, because every year I think about fudging it, and then always decide against it.

    Anyhoo, I'll keep you guys posted. I'm sending my stuff in shortly, and nothing will happen until at least 6 weeks from now because I'm going away.

    *fingers crossed*

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    Banned Melonie's Avatar
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    Default Re: I'm being audited

    It turns out I was flagged because of some work I did on the L Word- I guess I was an employee for the 3 days I worked for them, and was supposed to claim that seperately, but I didn't realize, I included it in my self-employment pay and treated it the same way.
    By this I'm assuming that the L-Word producers sent in an automatic earnings report in your name which the tax people's computers could not connect to a corresponding entry on your tax return ? In the states the IRS uses this very same cross-check of 1099 forms issued by clubs / photographers / you name it against tax returns as their #1 tool to flag (potentially) unreported income. And the worst part is that you have no way to be sure whether or not a particular club / photographer / you name it is going to file an automatic earnings report or not until (in the states at least) early March of the year AFTER you earned the money. So if you file your tax return in January or February, and THEN discover a copy of an automatic earnings report in your mailbox in early March which you did not specifically list on your tax return, you're virtually guaranteed to be questioned if not outright audited by the IRS. This is the reason that I never file my annual tax return much before the April 15th deadline.

    I agree completely that audits are no picnic even if you HAVE reported all of your income and HAVE kept organized, credible financial records and receipts. But they can be an absolute nightmare if you haven't !!!

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    Default Re: I'm being audited

    what percentage of your income do you loose if you file? i forgot to file this year (noone to help me with it), and last year my mom thought i only had a pizza job so she helped me file for just that job... i know not sending anything is horrible... but i do not understand any of it and do not want to loose a hundred bucks to some guy to fill out a paper, i was hoping to find a friend who could help out at the time.
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    Default Re: I'm being audited

    In an audit, its important to let them find something. They have to justify their jobs. Ideally it should be something fairly benign where the call could have gone either way and you chose to claim in your favor. A little smack on the wrist, you write them a small check and they go away happy.

    My best friend has a ruthless accountant for his business. She deliberately holds back some juicy stuff in my bud's tax returns. Her theory is that if the auditer gets too pesky she will dump the forgotten stuff on him/her and close the audit with a refund. Out of my league but it would be fun to be a bug on the wall and watch it.

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    God/dess scarlett_vancouver's Avatar
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    Default Re: I'm being audited

    In an audit, its important to let them find something. They have to justify their jobs. Ideally it should be something fairly benign where the call could have gone either way and you chose to claim in your favor. A little smack on the wrist, you write them a small check and they go away happy.
    You think?? Damn.

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    Member Poppy Corn's Avatar
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    Default Re: I'm being audited

    Quote Originally Posted by WEEZO
    what percentage of your income do you loose if you file? i forgot to file this year (noone to help me with it), and last year my mom thought i only had a pizza job so she helped me file for just that job... i know not sending anything is horrible... but i do not understand any of it and do not want to loose a hundred bucks to some guy to fill out a paper, i was hoping to find a friend who could help out at the time.
    The percentage you "lose" depends on your state. The avg is 20-25% for federal income tax and whatever else for state. It sounds like you got yourself in a craptacular situation that needs to be resolved by filing an amended return and saving for the penalties. Your choice, though, and maybe a couple hundred bucks to a reputable accountant could save you thousands.

    Btw, scarlet, I'm sure you'll do fine. As Melonie said, the presentation will count more than anything for an independent contractor. Good luck

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    Default Re: I'm being audited

    So how did everything work out with you? Seems like things were in your favor b/c you had all your records.
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    God/dess Paris's Avatar
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    Default Re: I'm being audited

    Quote Originally Posted by WEEZO
    what percentage of your income do you loose if you file? i forgot to file this year (noone to help me with it), and last year my mom thought i only had a pizza job so she helped me file for just that job... i know not sending anything is horrible... but i do not understand any of it and do not want to loose a hundred bucks to some guy to fill out a paper, i was hoping to find a friend who could help out at the time.
    I pay $1000-1500 a year to file my taxes. On the up side the amount you pay your accountant is deductable against any income earned that year, so you aren't really paying anything extra for his help.

    I totally agree that taxes are really beyond most people to figure out. Heck, the US tax code is so screwed up that even the IRS doesn't know if it is legal or not to charge income tax to workers. I'd like to see our tax code simplified to the point where anyone can figure out how to do thier own taxes.


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    Banned Melonie's Avatar
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    Default Re: I'm being audited

    I pay $1000-1500 a year to file my taxes. On the up side the amount you pay your accountant is deductable against any income earned that year, so you aren't really paying anything extra for his help
    Just to be clear, this isn't exactly true. Depending on whether you're in the 21% or 30% tax bracket (plucked out of the air examples), the IRS winds up paying 21% or 30% of your accountant's fee and you wind up paying 79% or 70% out of pocket as a result of deducting the accountant's fee as a business expense !

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    God/dess scarlett_vancouver's Avatar
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    Default Re: I'm being audited

    So how did everything work out with you? Seems like things were in your favor b/c you had all your records.
    Don't know yet...I'm in the UK until Dec 8th, and have advised them of that. I've submitted all my paperwork, and I've had no phone messages, so I'm hoping no news is good news!

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    God/dess scarlett_vancouver's Avatar
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    Default Re: I'm being audited

    All clear!

    *clap clap clap*

    Haha, they messed with the wrong girl!

    (gonna be extra-careful next year though...I'm obviously on the radar)

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    Banned Melonie's Avatar
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    Default Re: I'm being audited

    congrats ... if only the IRS was so accomodating down here in the US !

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