Can you imagine coming back to your office after vacation and finding an audit notice in your mailbox?
The mix of emotions that I felt when this happened to me was overwhelming: Why me? Why during busy wedding season? What if I end up owing a ton of money?
Even though I had accurate records and didn’t do anything illegal, I was still scared. I could not believe I was randomly chosen for a state audit (which isn’t nearly as scary as an IRS audit, thank goodness.).
Within a week, I had to print every possible Quickbooks report plus copies of numerous forms, tax returns, bank statements, credit card processing reports, and payroll records to prepare for the in-person meeting with the auditor. I’m so glad I understood the cash flow of my business. The meeting went fairly smooth but they still had questions and requested detailed information from some of my contractors, as well as additional forms that I had to complete.
After much stress on everyone’s part, the audit was declared complete and everything was fine. I didn’t owe any money. My workers were properly classified. My books were spot on. Phew! I never breathed a heavier sigh of relief in my life!
At the beginning of my second year in business, I hired a bookkeeper for a few hours each month to get my business set up in Quickbooks and to keep track of all my monthly expenses and income. This was the first task I ever outsourced. I now use 17Hats for my bookkeeping because my accounting is simpler now.
Over the years, her work for my businesses increased to include invoicing clients, processing payments, reconciling bank statements, and processing payroll. I also found an experienced accountant to do my taxes. I cannot imagine what kind of disheveled mess my business financial records would be in if I had tried to do them myself while planning events and running my wedding planning business.
Not only could I easily access all of the data needed for the audit, my bookkeeper and accountant could explain everything to me so that I understood potential questions that the auditor might ask.
The independent contractor agreements I had in place were outdated and didn’t even apply any longer. If I had a strong agreement in place with my contractors, the audit would have been over much quicker. I purchased a new independent contractor agreement here and started using it after the audit so that my business would be protected in the future.
I am so thankful that I had 100% integrity in my business. I claimed all of my income appropriately and kept my business finances completely separate from my personal finances. I was also aware of the differences between contractors and employees over the years and was able to have both types of incredible staff who helped my event planning business in countless ways.
Once the audit was over, I had a glass of wine (or five). I hope that you are never audited and that what I shared will encourage you to do whatever is necessary to have accurate business financial records, have complete integrity with reporting your income, and classify your staff correctly.
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