The dreaded tax audit

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Those of you who follow me on Twitter know that we recently endured a tax audit courtesy of the IRS. I’d been meaning to post something about it but kept forgetting. The looming filing deadline for income taxes has reminded me.

Why did we get audited? Well, who knows for sure, but taking the home office deduction (that’s Schedule 8829 attached to Schedule C for you Tax code-o-philes), which we do, ensures extra IRS scrutiny. Our income puts us in the high audit risk category, too. Too, my habitual scribbling in the margins of my tax form, in semi-readable crayon, may also have triggered the audit. I usually write: SUCK IT, REVENUER! But sometimes I just put: HA! HA! next to this or that borderline deduction.

Anyway, what we underwent was an in-person examination. The mail notification of the examination tells you what the agent is interested in discussing and then this has nothing to do with the matters you actually discuss while at the exam.

I keed, I keed because I luv.

Not really.

Honestly, in fairness to the IRS, the examination itself was painless. I brought such substantiation as I could for the various deductions the agent wanted to discuss, and I explained the nature of my business (I also gave away two signed books to the agent), and so on. Went fine. We parted, smiling, laughing about books, and the agent told me I’d get an examination report and revised tax assessment in the mail in the next few days.

After the exam, knowing what deductions were at issue, I did a quick back of the envelope worst-case scenario for the assessment and came up with anywhere between $5-6K.

Excellent, thought I.

Imagine my surprise, then, when I got the assessment and it was over $11K.

WTF? thought I.

Ah, but fear not, gentle readers. Since I’m one of those folks who actually likes doing his taxes on paper and is quite knowledgeable about the tax code (being a corporate lawyer and all), I pore over the exam report. Now, this report is not in an especially user-friendly format, and were I not knowledgeable of the tax code, I might have found it difficult to discover that it was, wait for it, waaaiiittt…RIDDLED WITH ERRORS. Yes, errors. And not understandable errors relating to the subtle arcana of accelerated depreciation, but the kind of errors that anyone reasonably well versed in the basics of the tax code should not make (and it is reasonable to assume that an IRS agent is well-versed, no?) .

So I call the agent, walk her through all of these mistakes, and she says she’ll make the changes and send me a new report. She does so and I receive the second report. I see that some of the errors are fixed, but some are not. Why? Well, I have no idea. So I go through the same song and dance one more time, get another revised report, and this one, at last, is correct.

Corrected assessment: $5K.

So why am I posting this? Well because there are two kinds of people in this country: Those who have been audited, and those who haven’t been audited…YET. Besides, lots of you are writers, file Schedule C and Schedule 8829, and are therefore more likely to get audited. And audits can do weird things to one’s psychology. I’m a lawyer, so I’m used to being…uh…argumentative. But lots of otherwise boisterous, stand-up-for-themselves people get awfully introverted when faced with the full force of a government agency, much less the IRS. Don’t let that happen to you because standing up for yourself may save you lots of money. Further (and this is important) make sure that someone with an excellent working knowledge of the tax code reviews any revised assessment with care (since mine had a $6K error).

I have probably ensured with this post that I will get audited again next year. To that, I can only say: SUCK IT, REVENUER!

Do you see how much I love you people? 🙂

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One thought on “The dreaded tax audit

  1. I know this is a late response to your post, but as a CPA and a huge fan, I had tell you this story was great. Don’t have any writers as clients, but I do have an artist. He has not been audited yet, but fears the inevitable each and every year.

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