IRS Audited My Entertainment Business
Since leaving the IRS, I’ve had some crazy opportunities during my business career. Here’s one that taught me some lessons.
I Was a Music & Comedy Promoter
Probably up to 15 years ago, I was seriously involved in producing and promoting entertainment, especially music and stand-up comedy. I worked with a few “big name” artists, including some A-list television names.
When I first started in entertainment, I had a lot to learn about the fast pace of that industry. Part of this “fast pace” was the difficulty in keeping good records from project to project. (The industry workers loved to get paid in cash, without paper trails for their income.)
Here are a few things that I learned.
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No matter how fast your business happens, always track your income and expenses.
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Even if you start tracking during the middle of the year, that is better than doing nothing.
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Ask a local accountant to create a tracking system that works for you. It doesn’t have to be fancy, difficult, or expensive.
At that time, I allowed my financial records to become pretty messy. And I was a former IRS auditor! But that was a big mistake.
Fast Paced Tip: Did you know that you can issue a Form 1099 to someone, right at the time of payment? You can do this even if you paid that person cash. (I also learned that along the way.)
I Had Some IRS Trouble
After a season of very large shows, the expenses on my tax return triggered an IRS audit. I handled the audit myself, without representation, and good financial records. That was my other big mistake. I experienced the IRS audit, firsthand, from the “taxpayer’s” side. And I was not prepared.
It did not go well at first. Because of the audit “adjustments”, I would have to pay around $80,000 in additional tax. That 1st meeting was hell.
See this related VIDEO on “How to Set Up a Payment Plan After IRS Audits”.
It Pays to Be Prepared
I managed to recover during this audit. Before the 2nd meeting, I got myself better prepared. I treated the audit as if I were the auditor, in reverse. My 4 most effective steps include:
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Anticipate the next round of questions.
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Prepare legal explanations to win my “sensitive” issues.
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Create the best legal argument to avoid penalty and further audit.
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Create the “Audit Presentation Package”.
And so I won my audit. I even received a small refund.
I was only able to handle that business audit because of my prior training as an IRS Audit Agent. Through that preparation, and my training, is the way that my business survived the audit. Having an IRS-experienced representative makes all the difference.
That experience taught me a lot about how people truly feel when they are audited. I will never forget that feeling. I will never let my clients know the feeling of the IRS audit.
What is the best part about my job when handling IRS and state tax audits? I love taking the stress and fear away, so my clients never have to feel its overwhelming intimidation and humiliation.
But I also love seeing my clients’ worries transform when I win the audit!