So, you got an audit letter from the IRS in the mail….the one thing you probably didn’t want to get. First of all, don’t panic! Take a deep breath and take a step back for a moment.

Let’s talk about the letter first. It’s usually what we call a laundry list of items that the IRS is requesting for one or more tax years. This is called an Information Document Request and is known as a Form 4564.

They usually have everything listed by category (note that the specificity and outline will depend on your auditor and how they choose to present the information). They will give you a time and date to meet. This is typically the day they also expect the information requested to be gathered and presented to them (some may request it ahead of time, so that they can review it beforehand). Again, don’t panic, even if they are asking for a lot of items. Break. It. Down.

We are going to dive into an example form now, go over some things to look out for, and tips for what to do and how to get started.

We are going to start with the highlighted parts on page one, because these are items you really need to pay attention to:

• For the appointment scheduled on May 31, 2018 at 8 a.m., please bring the following items:

The date of the examination should be one of the first items you see on the form. Make sure you always stay on top of that date: write it in your planner, set multiple alarms and reminders in your phone, whatever you need to do! That is one date you definitely don’t want to miss.

• How to Organize Your Records

Each auditor is different. You may get one who asks for the bare minimum or you may get someone who is super detail-oriented. Pay attention to how they want the information presented. We think Excel sheets and colored dividers for the information makes everything look organized and professional. It might sound silly, but presentation actually matters A LOT! Auditors see literally every kind of way people gather their information. Whether it’s you or your representative putting together everything, make sure it’s clear and easy to comprehend.

• Neither check carbons or check registers, nor bank statements/credit card statements alone are complete, acceptable forms of substantiation.

A lot of people assume they can get away with just submitting bank or credit card statements but that is NOT the case. Yes, the IRS will still want those, but they also want to see more detailed information for purchases. Bank statements (especially depending on where you bank) can be really vague and sometimes totally confusing to decipher (ever notice how some purchases don’t even show the store location by its actual name?). The main take-away here is KEEP EVERYTHING!!! Don’t throw away your receipts or invoices. In fact, make copies (receipts can fade over time), scan them and keep them in a file on your computer, and keep documents stored in a safe place.

• Please be advised the examination may be expanded to include other issues or open tax years. Additional records may be requested as the examination progresses.
• Please be advised that the examination may be expanded at any time to include the entire 2016 tax return and any prior or subsequent years.

That’s right, they can expand their search during the examination. This may be more records (they may decide to look at other categories) or other tax years. Only give the information they are asking for. They didn’t ask for supplies? Don’t give information on supplies unless they expand the scope of the audit. This is where representation and assistance with an audit might be important. Professionals have been through this process and know what auditors will ask, so they also know what not to say.

The items listed on page two are examples of how different categories may be presented to you and what specific records an auditor might want for those categories. After reviewing these you may think to yourself, “Where do I start??” Keep these in mind as you get started on the process:

• Do I have the records the IRS is requesting?
• Can I get my hands on anything I don’t have readily available in a quick manner?
• Can I handle this on my own or do I need some help? (there is no shame in asking for help. We have literally had clients box up all of their records for the year being examined and mail them to us to sort through and handle; that’s what we are here for!)

There are important things you can do right away:

• Gather necessary records, receipts, etc. and start putting them into categories and by date.
• MAKE AT LEAST TWO COPIES OF EVERYTHING AND DON’T SEND THE IRS THE ORIGINAL DOCUMENTS! (there is no guarantee you will ever get those back)
• If you do hire someone to assist, make yourself available during the day as they work on everything. They will have questions, it’s inevitable. Also don’t be scared to ask for a copy of what they are sending, these are your taxes.
• If you’re handling everything yourself, remember that organization gets you farther than you’d think. Separate categories with tabs or colored paper, make Excel sheets (or at least neatly hand written ones) with totals. If the auditor has an easier time going through items, more times than not it will also makes things easier on you (or your representative) during the meeting.
• They will ask you questions about your daily activity (especially if you have a business), they may ask about your assets, or certain expenses, so go in prepared and level-headed.

If you’ve got a recent college graduate living at home, searching for his or her first “real” job, you know how difficult the job hunt can be these days. In the interest of getting your kids off the sofa and out of the house, here’s some of my advice…

• Clean up the online profiles. Potential employers will check your new grad’s profile on Facebook and other social media sites. Advise your job-seekers to remove images and language that might give recruiters pause. Coach them on how to use sites like LinkedIn to create a more professional online persona.

• Network. Your son or daughter might be tired of hearing, “It’s not what you know, it’s whom you know,” but it’s still true. If you have useful contacts, introduce your children. Otherwise, nudge them toward making an effort to connect with people in their chosen field, and advise them on how to act.

• Work for free. This may seem counterintuitive when you want your children to start making money, but internships and volunteer work can teach them useful skills while introducing them to the world of work, and can bring them into contact with a wider range of networking contacts who may be able to help them in their fledgling careers. I can’t over emphasize how powerful this strategy can be, especially if your child wants to break into a difficult industry.

•Update the wardrobe. Remind your kids that jeans and T-shirts won’t make the grade in most workplaces, especially when they’re interviewing there. Help them pick out some sophisticated, professional-looking outfits so they can go out into the world with style.

*As a side note, you have probably been handling their tax filings if they were required to file at all. Make sure they are on the right track to filing themselves, whether that means referring them to your preparer or helping them find the best means to file for their situation.

It’s an all-too-common misconception that smart estate planning is all about avoiding the estate tax.

And, if that were the case, only the very wealthy would be affected by it — since only those with estates over $5.45M in value aren’t exempt.

You may fall into that category, but even if you DON’T (and also if you do), you should be considering the following questions as a family. You see, regardless of whatever funds will or will not be affected by this exemption, you should focus your attention on what you are really trying to accomplish with how you pass along your assets.

And this is the best question to ask:

What are your values and goals? In other words, “How do you want your success to affect your children and grandchildren?”

Every family has a different answer to that question, and it’s an extremely important — foundational — component of how we work with our trucking families, even in tax planning and preparation.

You see, some planning only takes “money” into consideration. And while that’s certainly an important item to consider, the money is really only there to create a specific destiny, and a style-of-life that you’d want to see carried into successive generations.

And it doesn’t require a lot of “it” [money] for you to be able to pass along your most precious values.

I often urge my clients and friends to actually take the time to consider the question above, because it may seem obvious on its face … but your answers (upon a longer consideration) will often surprise you.

And we’re here to provide any kind of support along the way that you might require. We’re pretty practiced in helping trucking families cut through the clutter of financial statements — and finding the hidden gems of core values and relationships.

And THOSE are the only things that really do last forever.

Let’s talk more, if you want to explore these issues. Because regardless of estate tax thresholds and legislations, walking without the right kind of plan can create an even worse mess when the time comes — and I’m not referring to anything about money.

Human nature being what it is, we tend to put off unpleasant stuff as long as possible.

Hey, I totally get that—I’m a human too. Say you’ve got a toothache…ugh! You put off going to the dentist ‘cause it’s gonna cost money. Perfectly good money that you were going to put towards that new fishing boat that you’ve had your eye on down at Bass Pro Shops.

Blasted!

And there’s gonna be drillin’…and pain. Even with Novocaine!

So you put it off…and you put it off again.

We actually have cases like these all the time, but one case sticks out in particular.

A fellow that owned a photography studio was referred to us by his attorney. Since he was only 60 miles south of Atlanta, he and his wife made an appointment to come in.

We met with them—a very nice couple actually. Seems he owed about $60,000 in payroll taxes.

We got a good clear picture of the IRS situation as well as an initial “snapshot” of their financial picture. They signed a Power of Attorney, and we expected to hear from them within a few days.

We sent them a letter thanking them for coming in. We re-stated the quotes we had talked about and told them we looked forward to getting to work with them in the days ahead.

Those days turned into weeks, which turned into months. We know now that he continued to receive IRS notices, each one more threatening than the last. And each time he received a letter, his wife asked him if he had gotten all of this worked out with our office. Not wanting to worry or scare his wife, he told her, “Yes, honey, I’ve got it all taken care of.”

Then one fateful Friday morning, there’s a knock at their door. The wife answers it. Standing there was the Agent in Charge, along with about four other IRS agents and several sheriff’s deputies.

One of them is holding the roll of yellow “POLICE” tape that they have already wrapped around the front of their property.

She yells her husband’s name at the top of her lungs.

The Agent in Charge informs them that they are conducting a Seizure of Property, and asks them to stand aside while they come in and secure the premises.

The husband quietly tells the Agent that he had been in our office, and would she (the Special Agent) mind if he tries to reach us real quick.

She agrees.

He reaches our office, they got me on the line, and he tells me what is going on with the seizure.

I asked him if he got the name of the Revenue Officer in Charge. He did, and he gave me her name.

I asked him if he would ask her to come to the phone.

Luckily, I had met this agent just a few weeks before under more pleasant circumstances. It was during tax season, and I was partially responsible for organizing a televised call-in program for taxpayers to call in and have either a CPA or IRS agent answer their questions. This was the IRS agent that we had selected for the call-in program.

After a bit of going back and forth, the Agent agreed to a very brief delay in the seizure, and put him on a very short leash to provide us with the needed information to work out a settlement.

We were able to work out an agreeable arrangement, but about three weeks later, I got a call from the Agent that had been in charge of the seizure.
I’m thinking, “Holy smokes—what could she want? Has something gone wrong?”

When I got on the phone, the Agent greeted me graciously, and I nervously responded in kind.

She was calling to commend me for the way that we handled the seizure, adding that those events don’t normally have happy endings.

Towards the end of our conversation, she chuckled and said she almost felt sorry for the husband, because it was very clear from the moment his wife answered the door that he was in a lot more trouble with his wife than his was with the IRS!