Fudgesticks!

[epiphany]

Just finishing up the paperwork for my lawyer today so I can drop it off tomorrow. Then I thought I would have a little breather...but NO! I go down and get the mail 'cause I didn't get it yesterday and my 2005 and 2006 returns are being audited by the IRS! Crap, Crap Crap!

I have nothing to hide but this is a GIANT pain in the ass. If you thought the BK paperwork was tricky, you should see all the documentation the IRS wants!



ep

[epiphany]

I have some questions on this now that my mind has been spinning all day. Needless to say I don't have the paperwork for the lawyer done yet because this latest turn of events is making me crazy.

I have to call the IRS within the next 10 days and schedule an appointment. I am worried about doing this since I have no idea when my 341 will be scheduled for. I need some time to get the paperwork together for the IRS too so do I tell them about my BK? I know that taxes can't be discharged so that's not what I am asking (but I really think I am covered and they are going after the wrong fish anyway..I am not even a guppy, I am guppy poo) but do I tell them about the BK? Is it relevant to them? Do I tell my BK lawyer about the audit...is it relevant to the BK?

Among the documents that the IRS wants me to bring are all loan documents, including payments for the tax years in question, both business and personal. There are no business loans and I never claimed any type of interest on my returns. And by loans, do they mean credit cards too? I am sure I will figure this out but this really sucks and it's the worst possible timing.

Gee, I really enjoy wrapping up the filing process, getting served with a summons, and an invitation to an IRS audit all within about a one week period.

no stress here

ep

[WhatMoney]

Did you say something critical about Bush or Cheney? It would seem "they" are after you.

Usually an IRS audit gives you some clue as to why. A random audit is normally only for one year.

[nomoretogive]

It does seem when it rains, it really poors. I think I would tell the BK attorney in case there does become a conflict in scheduling.

[epiphany]

Did you say something critical about Bush or Cheney? It would seem "they" are after you.

Usually an IRS audit gives you some clue as to why. A random audit is normally only for one year.

Hey, you know too much, was it YOU that reported me?

Only clue I have as to why is they want to focus on my business schedule C.

I have a small ebay business which only started showing a profit in 2007. After further research today, I have discovered that I should have been reporting an end of year and beginning of year inventory. I was not. I was only taking what I paid for goods, versus what I got for goods, which could explain the red flag. All of my expenses are well documented and on the up and up.

I can't come up with those inventory reports though, short of falsifying them, which I won't do. Even if I had known that I needed to calculate inventory, I don't know how I would have done it. I buy large lots of things and sell them off piece by piece. These are collectibles which fluctuate in value and I don't see how I would have calulated the cost of what was left from what lot.

Don't get me wrong. I have receipts for everything I sold and everything I paid for the merchandise. I just wasn't doing it right on paper. I had an accountant up through 2005, which is one of the years being audited, and he never once asked me for an inventory report. I started doing my own taxes for 2006 and beyond and just imitated what he did, assuming it was correct.

I know ignorance is no excuse so I guess I'm in trouble. My cost of goods may be disallowed. I do look forward to handing them my shoebox(es) of postal and other receipts though.

And I would still like to hear any advice from anyone out there!

ep

[epiphany]

It does seem when it rains, it really poors. I think I would tell the BK attorney in case there does become a conflict in scheduling.

yep, you are right and will do in the morning. Thanks.

ep

[Flamingo]

IAmong the documents that the IRS wants me to bring are all loan documents, including payments for the tax years in question, both business and personal. There are no business loans and I never claimed any type of interest on my returns. And by loans, do they mean credit cards too? I am sure I will figure this out but this really sucks and it's the worst possible timing.

ep

The years 2005 and 2006 are irrelevant to your BK. The only thing that might be of interest is if you end up owing a substantial amount after the audit. In any event, I would definately mention it to your attorney just to be on the safe side so he/she is aware of it. When it rains, it pours, doesn't it? You will get through it; just make sure you have all records to back up everything listed on both those returns. You could have been just a random audit or there may have been a red flag on both those returns. Just be sure you can prove anything on there.

[epiphany]

The years 2005 and 2006 are irrelevant to your BK. The only thing that might be of interest is if you end up owing a substantial amount after the audit. In any event, I would definately mention it to your attorney just to be on the safe side so he/she is aware of it. When it rains, it pours, doesn't it? You will get through it; just make sure you have all records to back up everything listed on both those returns. You could have been just a random audit or there may have been a red flag on both those returns. Just be sure you can prove anything on there.

Thanks Flamingo. I appreciate it.

I have records/receipts out the ying yang so I should be okay as far as that goes. I will definitely inform my attorney.

What I don't get is that they don't audit 2007, which is the first year I show a profit. Perhaps they think I was just taking the deductions for the expenses before then. I dunno. Though I do have to bring 2004 and 2007 returns with me when I go.

I also don't get why they want any personal loan documents/payments and proceeds. This may not be so easy for me to come up with...things are scattered. Anyone know why this would be needed?

I have always tried to do the right thing when it comes to my taxes. Many ebay sellers do not even declare. I sincerely hope my honesty doesn't come back to bite me in the butt.

Thanks again,
ep

[reallynervous]

I am sorry you are having this added stress right now.

I had a small online business. Thru the calculations on Schedule C for cost of goods sold, it seems like you only get to count the cost of the items you sold during that tax year, not the cost of all the items you purchased for sale during the year. That is why they require the beginning and ending inventory amounts. Is there a way you would be able to calculate that from your purchase and sales records?

I am worried about how mine will look on the BK because my attorney had me use yard sale values for the inventory I have left, which is significantly less than the dollar amount I had as my ending inventory amount for 2007. This is because the items I have in inventory are really specialized items (which is why the business wasn't successful - too much of a niche) and they would be really hard to sell at a yard sale, etc.. They would be sold at a fraction of my cost if they could be sold at all. My attorney didn't seem too worried about it, I am guessing because we have tons of unused exemption dollars.

I hope this will all work out well for you.
reallynervous

[epiphany]

I had a small online business. Thru the calculations on Schedule C for cost of goods sold, it seems like you only get to count the cost of the items you sold during that tax year, not the cost of all the items you purchased for sale during the year. That is why they require the beginning and ending inventory amounts. Is there a way you would be able to calculate that from your purchase and sales records?

You're exactly right and this is where I screwed up. I am not sure how I can calculate this now...but I guess I should try. My problem is, I may buy a lot that has 30 items in it, then piece it out but may still have 3, 4 of five items that didn't sell but may sell later in the year or the year after that. And I don't know how to break it down. I could buy a lot of 30 with one item being clearly (to me) more valuable than the rest. How do I calculate the value of the rest of the lot, which could even be worthless?

I am just not sure that there is an intelligent way to do this for me at this point. I'm open to suggestions!

Like you, my BK laywer is not at all worried about my inventory ('course he doesn't know about the IRS audit yet). But my items are niche too, so wouldn't bring crap at yard sales and I am not sweatin' that.

ep

[AngelinaCat]

Hi Epi:

We know well your feeling of ‘guppy-poo-dom’. We have spent the last two weeks and all of today trying to prepare for our 2004 Examination this Thursday.

As to the IRS, do you have a CPA or other Tax Preparer doing your taxes? If so, that person should speak for you to the IRS. By all means inform that person of your BK situation and let them handle it.

Otherwise take all your IRS paperwork to the BK attorney and let him/her know all about. That person should be able to advise you.

In any case, in 2006 we had a notice from the IRS that they were going to start garnishing our CU account. We had previously signed an agreement to start a monthly payment for our back taxes. We had not fallen behind on that schedule. When we got this notice—it’s like one hand didn’t know what the other was doing--my husband had our CPA contact them and they rescinded the garnishment. If our account had been garnished, the bulk of it was my husband’s SS and Pension income. We would have had nothing to live on. The CPA reminded them that we were not behind on our payments

Once the BK was filed, the IRS officially notified us that we were excused from making the payments, pending outcome of the BK. Another worry we will have to address later. Can’t do it. Now.

I Hope this helps. My best~~~~

[epiphany]

Hmmm...brine for thought. Thanks.