Doesen’t just hearing the word “AUDIT” give you the heebie jeebies?  If so, you’re not alone. 

I am fortunate.  Most of my clients are not audited.  Occasionally though - it does happen.  Like yesterday.

 Just so you know, my clients don’t actually attend the audit - I do that in their place.  It’s one of  the perks of having a CPA.  We represent you.   It’s a good thing too.   It can be a little intimidating to look at an auditor and tell them they are wrong.  I had to do that yesterday - several times.  Unfortunately, the auditor was right about a few things too. 

 Auditors usually pick two or three things to focus on - they tell you what they want to see before you show up for the meeting.  If you can get them happy on those items, you are done.  In our case, one category the auditor wanted to see was travel expenses.  She wanted to see receipts and iteneraries.  My client is so great - he had receipts - lots and lots of receipts.  He even organized them by trip.  But he didn’t have time to  prepare iteneraries.  The auditor didn’t even bother to look at the receipts.  She wanted iteneraries and without iteneraries, she had no reason to bother with the receipts.  Lesson here is:  you cannot come to an audit halfway prepared.  Her initial report now disallows all the travel deductions.  Every last one of them.  Is there any good news here?  Of course.  We now have 30 days to produce iteneraries.  Lucky for my client - I already know his trips are legitimate.  We discussed that before I prepared the return.  I am not worried about a huge adjustment for him.  All he has to do is get that paperwork to me. 

My client had 10 days to prepare for this audit.  He had to produce a mileage log (from 3 years ag0), odometer statements, receipts, iteneraries and more.  He did pretty well given the time frame.  He was just lucky that this happened in his slow time for business.  Other clients have not been so lucky. 

Ask yourself now - “If I had to produce what I need for an audit in the next 10 days, could I do it?”  If not, get busy!  A good way to start is by using my tax documentation checklist.  When you sign up for my newsletter, we’ll send it to you at no charge.   Just go to the home page at www.deductiondiva.com and sign up for the newsletter.  Check the list - and start filling in the holes in your arsenal of documentation. 

 I would  love to hear from you.  Do you have any audit stories?  Please share.  All of those who post replies to the blog will be entered into my drawing to attend my teleclass “How to Pay Your Kids” on Sunday March 30th at 7PM Central time.