“You’ve been selected for a tax audit” is a scary sentence for a mamapreneur to hear on the phone….and I heard it a month ago. Luckily for me, my local sales tax office chose someone who is terrified of getting in trouble so I had (almost all of) my ducks already in a row. But I was still terrified to get audited and as the big day drew closer, my nerves only intensified.
* Please note: Some links in this post are affiliate links because I want to share the products that are helpful in my business. These links are denoted with an * before the link and do not cost you anything extra but might provide me with a small percentage of the sale if you were to purchase.
Now that my audit is over I want to share some of my newfound knowledge with you. I’ll dig deeper into the “to do’s” in a later post, but this week let me tell you what I learned from my audit and how it’s changing the way I run my business.
- They aren’t out to get you
So often auditors are painted in a negative light but I was pleasantly surprised to find not only a kind and understanding auditor, but one who told me from the beginning that her department was not concerned with raising funds but with making sure businesses were compliant. Just like having a business license protects you, so does having tax auditors. My local office wants to audit businesses regularly so that they can catch any errors before the fines, fees, and costs skyrocket. And my auditor explained the selection process to me and it sounds like it really is a random selection.
- An accounting program and an accountant made my audit so much easier
I have an accountant who handles my annual taxes in addition to being a place of reference when I have questions. I also use *Quickbooks for my accounting which has an extensive report repository to pull from. Because I use both of these, gathering my information for my audit was fairly painless. Yes, I did have to print out a number of reports that I hadn’t been printing during my EOM bookkeeping previously, but, in all, gathering the information took no more than a couple of hours. And when I had a question about a form, my accountant was able to quickly email me exactly what I needed.
- The tax office is an easy source for reliable answers
While myself, and hopefully everyone else that you read about online, works hard to try to provide you with accurate information, there is always the possibility of human error. In addition to that, the tax laws for your city could vary greatly from the tax laws in mine, so what I advise you to do may not have any application where you live. I found that my auditor was not only willing to answer questions about the correct ways to do things but also volunteered to pull specific codes for me and explain them to me so that I could understand exactly how to stay in compliance. I know it seems scary to call the tax office and you could be afraid that you would trigger an audit, but they really do just want to help you do everything right – and no one will be able to answer your questions better than the one who could find all the ways you’re doing it wrong.
Overall, my sales tax audit was practically painless. I did discover a few ways that I was unintentionally reporting incorrectly but they are easy fixes to modify as I go forward in my business. I’m now confident that I’m keeping my books correctly which gives me an incredible peace of mind!