IRS audits aren’t always a bad thing

I admit with blushed cheeks that Debbie and I missed the deadline for filing our income taxes with the IRS and the State of Idaho this year.

As the April 15 deadline approached it became clear we weren’t going to be able to complete all of the paperwork on our end so that our accountant could do his magic.

It didn’t help that we had somehow missed reporting some financial information for my mother, who passed away a year earlier, so we had to file another return for her a year after her estate had been settled. That was an expense I hadn’t planned and I wasn’t about to go back to my brothers and sisters and ask for the money back. Besides, it wasn’t that much, and wasn’t worth the embarrassment of letting them know (until they read this column).

As the six month extension moved closer I became worried we weren’t even going to be prepared by then. So when I pushed Debbie a little to get the paperwork done, our two sons overheard the conversation.

“Wait a minute,” they said almost in unison. “You didn’t pay your taxes on time? That’s like us telling a professor we don’t want to finish an assignment right now, we’ll turn it in when we’re ready.”

So I explained that, no, we had filed and paid our taxes throughout the year, but we just needed an extension to complete the paperwork. And if we owed more in taxes, we would also be paying penalties and interest on top of it all.

So if you equate it to a school assignment, I said, if you turn it in later you take the chance of the grade being lowered because of that.

At the same time, I knew we hadn’t had a particularly good year, so we wouldn’t be paying any extra taxes and penalties. The only penalty was that we had to wait longer for our tiny refund.

Once the taxes were filed, within the six month extension deadline, I was surprised how quickly our state tax refund came back.

Then a few days later a letter came from the IRS and I was thinking again how fast their response was.

But the response wasn’t the check I expected. It was a notice that they had performed a correspondence audit on our 2011 return and found some discrepancies. According to the letter we failed to report some income which meant we owed another $650 bucks.

I lived through one audit years ago after my father died. It wasn’t pretty. But rather than a correspondence audit, where they just randomly pick you, then send you a letter to tell you what they’ve found, it was a full blown audit where you have to go to their office and explain your position. My dad wasn’t one to worry much about bookkeeping, and since he was gone, it was up to me to help mom figure it out. Turns out they owed quite a bit.

That audit of my parents’ taxes came at the same time as I wrote a column criticizing the IRS for their Gestapo-like tactics, lamenting how they were the only agency that followed their own rules, most of which took away a person’s rights. The same could be said today of the NSA and Homeland Security.

When our accountant went to discuss that audit with the IRS representative, he had the tax paperwork sitting on his desk, right next to a copy of The Power County Press spread open to the editorial page, with my column circled. He said nothing about it, but the point was made.

The accountant called me and suggested I back off. Being much younger and full of myself at the time, I considered calling their bluff. But better heads prevailed. They actually cut my mom a break and sliced her back taxes in half. (It didn’t hurt that she was so nervous she wrecked her car on the way to the audit.)

So when I received the IRS letter stating Debbie and I messed up in 2011, I thought about just paying it and moving on. Don’t mess with the IRS.

Debbie suggested we talk to the accountant just in case, so we did, and come to find out we had messed up, but the correction actually was in our favor. So rather than owing the IRS the $650, they owed us a little bit back.

Much to my surprise, not all audits are bad things. But I don’t want to press my luck. Next year I’m going to make sure we file on time.

And my boys won’t be asking for extensions on their homework.

 

 

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