Are you Afraid To Talk to An IRS Agent?
If You Are Afraid To Talk To An IRS Agent, Here Are Top Reasons Why You Must Talk To An IRS Agent!
Don’t be afraid to talk to the IRS. IRS agents are human beings, not monsters. Canada Revenue Agents are no different, either. And certainly not to be feared. They have no magical powers or torture chambers.
If you are afraid t talk to an IRS agent then you are not alone. Most business owners and companies fear an IRS audit. These fears are too often manifested by a lack of knowledge about the IRS themselves and the audit process they use. When you are chosen for an audit it is primarily because your write off amounts compared to your income or wages are excessive as compared to your other deductions.
For easy to understand deduction advice this book is excellent! Deduct It!: Lower Your Small Business Taxes
IRS Tax Tip: For instance do you own a donut store and spent $5.00 on flour and $2,000.00 on office supplies? Did you write off your Valentine’s day dinner and gift to your wife? Do you go to the grocery store and write off the entire list of food items as “meals?” These are obvious examples, but they send red flags up in the air like fireworks to an IRS agent. And, Yes, you will get audited.
Here are more great big red flags to an IRS agent:
• High mileage
• High meals and entertainment
• One line item deduction for everything – Marketing, for instance, and no other deductions for anything else.
• Large donations
• Home business write offs of large amounts of space as compared to total square home footage
Business owners in the first 1-5 years of business are shown a bit more leniency in these areas, but if it’s not a legitimate write off, don’t take it.
Don’t avoid finding out what legitimate write-offs really are. And don’t be afraid to talk to an IRS agent. Spend an extra hour with your CPA every quarter – And pay them for their time. Some accountants are so excited to pass on this information that if you buy them a cup of coffee or lunch they will ‘spill their guts,’ to you about legitimate write off expenses. This one hour can prevent the IRS Agent conversation from happening at all. Savings = Gold
IRS gents operate primarily from paperwork correspondence. This helps them avoid expensive and time consuming audits. This also makes their response time much slower, but that doesn’t mean they won’t come looking for you at some point, either.
Know when you talk to an IRS agent that they have been given such negative publicity for unfriendly actions and behavior that they are now forced to operate in a different manner. So, being able to talk to the IRS agent was never better. Having said that does not excuse you from bad behavior when you talk to an IRS agent.
What can you do to prevent having to face a fear of having to talk to an IRS agent?
• Keep records and receipts organized
• Document meetings, lunches and travel to help audit-proof yourself
• List all expenses from your petty cash into a legible format – Excel is fine
• Send your accountant to your audit in your place
• Defer questions you don’t know the answer to (because you aren’t the accountant), to your accountant or bookkeeper
• Get professional advice
• Know the difference between Tax Avoidance and Tax Evasion: Tax avoidance means you have legitimate deductions that won’t send you to jail, but may be mis-classified or over stated ‘accidentally.’ Tax evasion means you knew you were mis-representing your income and that you did it on purpose, and that it can be proven beyond a doubt.
Find out how to turn vacations into legitimate tax deductions. You can do that with documentation:
• Separate business from pleasure by sorting receipts according to purpose – Your lunch with a local business who needs your services (a hotel that uses a taxi service to pick up or drop off guests at the airport in your city and you own a taxi service). Get their card, their brochure and document your discussion with them. Do you also need to conduct research – parking, transportation, other meals may also apply, but your massage and tequila shooters will not.
Make sure you know and understand the difference. As a bookkeeper I often take calls late at night, but these calls may not be perceived as business, even though they are, and even though I can prove it, but sometimes it’s just not worth arguing about.
Are You Still Afraid To Talk To An IRS Agent?
Keep this one last thing in mind when you are Afraid To Talk To An IRS Agent:
“IRS agents have a job – Yes, however, they are also human beings. Behavior on your part that demeans them, challenges them or ignores their effort and energy will (often) result in a demonstration of their own due diligence to hard rules, and bad behavior.
Often negotiations break down because people fail to acknowledge them as human beings, but instead as whipping posts to be abused. Once tempers flare, the game is over – You lose.
Yes, send a professional in your place to handle an IRS audit, but take over the parts you can handle yourself, like phone calls to arrange the meetings, correspondence, copies of paperwork, . . . and anything else you can do.
You’ll cut costs with your accountant and glean some respect from an IRS agent in return. If you get caught trying to answer a question and you really aren’t sure or do not know the answer – Say So and ask an IRS agent if they wouldn’t mind if you wrote that question down so that you can get them an answer at a later date – usually within 72 hours (or sooner). Write the question down, ask -also – if you can forward the question to your CPA to answer for you and if they ask you, “why” tell them because you were not prepared to answer that (particular) question at this time and you do not want to appear to be uncooperative or answer incorrectly and foolishly and waste their time.
So, if you find yourself having to return a phone call from an IRS agent, or are scheduled for an audit, buy yourself a bright and cheerful bouquet of flowers and place them within your line of vision, grab a special and flavorful cup of coffee, pick up the phone, make that call and smile out loud so that you project that into the phone and the person you are talking to.
Say, “Yes, please and No thank you,” often and above all – Do not resort to bullying tactics or name calling and be sure to keep the sighing out loud and the, “Sheesh,” “Oh Jeez,” “Oh Brother’s,” and, “!uc* You’s,” to yourself! When you are on the phone use sign language for that!
IRS agents are human and they will treat you nicely, but their rule of thumb is (as determined by experience and job requirement), “You First!” Make that phone call and do not be afraid to talk to an IRS Agent.
* “Italicized content” is Reprinted from my own comment post on another accounting website article. I give myself permission to reprint my own words. You may not exercise that same luxury.