Yes, yes, this past Tuesday I was audited by the IRS. (Wow. "Audited." Never thought I would ever write that.)
The "invitation" I received to have my 2004 return "examined" was apparently chosen at random and my charitable contributions were singled out as the item of primary concern. (No suprise to me as I feel very responsible for how I spend my money and know that when all is said and done I will be held accountable for the financial choices I make; I like passing on the blessing God has given me and act accordingly.) Fortunately, I still had all my financial data from 2004 and it only took an hour or so to organize it and draw up a spreadsheet detailing the contributions I had made. Oddly, I was asked to bring my 2003 and 2005 returns as well even though it was very clear from the letter that it was my 2004 return that was under examination. Hmmmm.
Thus Tuesday morning around 8:25am I walked into a/the federal building in downtown Wichita with a backpack filled with documents. A quick airport-style securty screening (complete with x-ray machines and metals dectectors) and I was up the elevator and seated at the desk of my examiner. As it turns out, she was a relatively new hire and her boss was there examing her ans she examined me. I found this quite humorous but decided to keep the joke to myself. This is, after all, the stern-faced IRS.
First question from the examiner: "Anything you want to tell us about now up-front? Any known omissions or errors on your return?" Yikes! That is quite a loaded question. Without much pause I decided to stick to my guns and declined to the opportunity to confess to cheating on my taxes. The examiner then deftly noted that I did my own return. Had I always done my own return? Yes, I always had, without the aid of any software. She was good, though, letting me know this wasn't a social visit in the least.
Still not getting to the item listed in the letter, she then went through the process of verfiying my source(s) of income. Do you have any interest-bearing accounts? Any investments that generate capital gains? Alimony? Child-support? Trusts? Estates? No, no, no, no..... Again, the purpose of these questions seemed more at getting me to confirm that my original income stated on my return was accurate and/or confess to any revenue that might have "slipped my mind" when I filed my returns. Towards the end my patience was wearing a wee bit thin; I felt like saying, "Just look at my return! That's my income!" Obviously, that wouldn't have helped. Its also worth noting that these questions literally had nothing to do with why they brought me in. They seemed to be standard questions that anybody being audited would have to answer.
While I'm thinking about it, the letter I received specifically mentioned that a lawyer or tax-preparer was allowed to join me for the examination. Considering that I lived in Boise in 2004 the odds of any relevant party in my tax preparation being available here in Wichita are virtually zero. If I hadn't done my own taxes, I wonder how I could have answered some of the questions posed. This is a point in favor of doing your own taxes or at least understanding every item on the tax return. You as an individual may be the one having to defend your return, not your tax-preparer or lawyer.
Finally, we jumped into the official item of examination, my charitable contributions. Having the spreadsheet delineating all the pertinent transactions helped TREMENDOUSLY. The spreadsheet showed the total for allof my contributions (which matched what I declard on my taxes) and was broken down by the individual organizations involved; these matched the statements I had received from each organization. The examiner didn't check every single donation (thankfully; that would have taken quite a bit of time) but sampled from each organization to which I had donated. She asked for not only a receipt verifying the donation but also proof from my accounts that I had actually made the donation (typically in the form of a
cleared check, credit card statement or bank statement). Its this latter part that caught me off-gaurd; if memory serves, the instructions on the tax return form only mention a receipt for each donation and not necessarily a corresponding cleared check or the like. I guess the assumption is you'll keep bank and credit-card statements; thankfully, I had.
There were a few minor hiccups in the process: I couldn't find my bank statement for the month of one of the transactions that was sampled for examination; a carbon copy of the original check was good enough. Also, there was a question whether one of the charities to which I had donated was officially registered as such. After a bit of digging with no conclusive answer the examiner got pragmatic. In light of the relatively small donation amount, the fact that this was a one-time donation and that I didn't intend to donate again she decided to give me the benefit of the doubt and assume the charity was registered.
This brings up another interesting point: over the course of the interview/examination she asked for a brief description of the kind of work each charity carried out. This was not only a great opportunity to talk to these (assumedly) non-Christians about the good that Christians are trying to bring to this world but also to remind me about each of these projects. It made me feel blessed that I could be a part of what God is doing, to be cut-in on the action.
A few more questions, checking a few more transactions, and we were done. The examiner was pleased that things went so quickly and when all was said and done, no adjustment was made to my return. Yeah! In-and-out in under an hour.
Lessons from the examination:
-Keep EVERYTHING. Official paper documentation for all financial matters makes any kind of audit much easier for you and the IRS
-Keep everything ORGANIZED. Again, having all these documents readily available made the whole process go very smoothly.
-UNDERSTAND your tax return and be comfortable justifying any item on the return. Having the above mentioned documentation makes this easier.
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