Absolutely right.
In my case, the agent picked a month at random for the year in question and
asked for all the receipts, both income and expenses. Matched every single
one to the Quicken entry. I asked jokingly how close we had to be and he
said "to the penny." Gulp.
We then went over them one by one (probably about 300+) and he asked random
and sometimes unusual questions about the particular item such as, what do
you use foamboard for? Why acid free?
I have my receipts filed by month and within the month, by show or event.
Another advantage of Quicken (or QuickBooks or whatever) is that all the
entries are made automatically by downloading receipts from shopping online
and/or income from credit card purchases. The cash/check deposits match the
bank deposits.
Point being, there is rarely a manual entry in Quicken files, at least for
me so that eliminates much error.
Also, interesting trivia, the IRS opened a whole new branch (according to
the agent) in 2000 or so solely dedicated to auditing the sole-proprietor.
He was in charge of the region's creative businesses, to include visual
artists, actors, free-lance writers, models and others. How cool is that?
Another interesting note, when we ordered pizza for lunch, he insisted on
paying for the 2 slices that he ate, which he calculated to the penny.
And I ended up not owing a penny. In fact for all the work we went through
and all the stress I received an austere letter about three months after the
audit stating simply that my tax liability had been found to be zero. Carry
on, little artist.
Maria
[=o=]<>[=o=]<>[=o=]<>[=o=]
www.1000woodcuts.com
www.artfestivalguide.info
[=o=]<>[=o=]<>[=o=]<>[=o=]
Subject: [artshow_photo] Re: Newbie question re Federal Income Tax on
startup photography bus
> Incidentally, I withstood an audit on my third year in business,
> lucky me.
> Turbo Tax and Quicken were life savers because every little dollar
> in or
> dollar out was duly noted and accounted for. The IRS auditor just
> loved my
> files, seriously.
One thing I will say about Turbo Tax and Quicken, which I have used
for years. In an audit, the IRS needs copies of ACTUAL RECEIPTS, not
line items in an accounting program, for documentation. The reports
from Quicken are a big help, but you MUST back them up with real
receipts.
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