Bryan Dear’s Blog

The first principle is that you must not fool yourself – and you are the easiest person to fool.     Richard Feynman, 1918 – 1988

The letter can almost look innocent except for the return address. A notice that an audit is coming down the pike can produce many different reactions (denial, procrastination,and probably the most common, a kind of fear). But fear not.

 It’s amazing how many different audits we see. There are retirement plan audits by the IRS, there are Department of Labor audits from both the federal and the state agencies, there are state department of revenue audits and then there is the plain jane IRS audit of the company tax return that inevitably pulls in the payroll information.

In these audits, we find they look for regulation compliance (are the proper forms being prepared correctly and submitted in a timely manner), is there unpaid overtime, are S Corporation owners claiming enough wages, are there contractors who should be treated as employees, are there employees who don’t have a legal status to work  and do the numbers line up with what’s claimed on the tax returns?

While the chance of being audited is relatively low from any of these agencies, there is a decent chance at least one of them will find you because there are so many of these agencies. And if you have chosen to raise the red flag such as forgoing paying overtime to your employees or not claiming wages as an S Corporation owner, there’s a better than even chance that you will be audited.

So what do you do? It’s really pretty simple.  Do what’s right – pay your overtime, file your tax returns on time, make your payments on time and when you have a question as to what’s the right way to do something, ask someone who deals in this all the time.

Audits can be an inconvenience or a real pain. Good record keeping and doing what’s right will greatly reduce the pain factor. If you business model can’t afford to do what’s right, question your assumptions.

Here’s to having an audit-free business. Preparing for one will certainly allow for better sleeping.

Cheers,

Bryan Dear

www.payrolldept.biz