Last weekend I began preparing for an audit that was scheduled for Tuesday with the WA State Dept of Revenue. This was for the gym business my son owns, also my business partner. I was told by John Hamilton, the auditor the business was randomly chosen for this audit. There are times that businesses are manually chosen. In this case we were just one of the computer sample test businesses chosen.
I was told the audit is to make sure we paid WA State use tax on all assets purchased for use in the business as well as confirm we are paying the correct tax on memberships, products, and services, such as personal training, tanning, etc.
The audit began with the first month of business which was February 2008 through the first quarter 2012.
I was ready. I audited all the monthly reports before the auditor did to make sure we were taking the promo referral fees as a deduction for excise and sales tax, water sales deducted from retail sales and sales tax was being paid correctly.
In addition Iwas informed he would review all the purchase of assets of the business to make sure use tax was paid. I trusted we handled it properly.
The findings . . . we did not pay sales tax on four asset items. The asset purchases were on items made outside the state of WA. We will receive an assessment around the end of June and the gym will owe approximately $2k in use tax from 2008 from assets purchased. All other sales tax testing was in good order.
This was a good experience, I learned a lot and the audit went smoothly. I had all the receipts for the asset purchases that showed what we did pay sales tax on and what we did not. I presented them to John, he checked it off his list, or wrote a comment "use tax owed".
The lesson . .
1). Create a solid organized financial foundation so when you receive a letter from the state or IRS you will be prepared immediately for the audit and you will be able to show your receipts.
2.) Make sure to have all of your asset receipts on file, titled and organized by year. Electronically or paper. This will provide the support you need when they ask for the receipts.
3.) Organize all of your invoice and sales receipts by month, by year.
4.) Keep all Dept of Revenue reports and payments by year in a folder.
5.) Audit your records or have your bookkeeper audit your records and review them quarterly. Less surprises along the way.
6.) Do not panic . . the auditor is there to perform their job, they are just like you and I .. human and need to get the work done. In my case the audit was quite pleasant and I asked questions and learned a lot. The audit is based on the rules of the state legislature that was voted in by your representatives.
7.) make sure you have cash stashed in the savings for times when you owe past tax so you do not have to scramble to figure out how you are going to pay the tax bill.
Are you ready for an audit? Use the above tips to set yourself up for success.
Questions, comments, leave them below or e-mail me at d.rosenfelt@cfomadeeasy.com.
Warmly -
Debbie Rosenfelt
Chief Heart Officer
No comments:
Post a Comment