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Blog: Minimizing Financial Clutter
Organizing Lessons from an IRS Audit

The very thought of being audited by the IRS sends chills down our spines. Mary McClung, a professional organizer and my friend and colleague, was recently the lucky winner of an audit.  She lived to survive it, and she gave me permission to share her "lessons learned" with you.
         Do issue 1099s if you are required to do so.  This year, if you paid $600 or more in compensation for services rendered by a nonemployee to your trade or business, you need to give a 1099 to each of those service providers. This is a major bad thing NOT to do.  If issuing 1099s makes your head hurt, ask your CPA to issue them for you. 1099s to the people you paid were due by January 31. The 1096 that reports these 1099s to the IRS was due by February 28.  (Contact your CPA if you have missed these deadlines this year.)
For clear instructions on issuing 1099s, go to http://www.ehow.com/how_13664_know-issue-1099.html or to the IRS website http://www.irs.gov/pub/irs-pdf/i1099msc.pdf.
         Bring photocopies of everything that the auditor needs to address the issues that are the focus of the audit.  In Mary's case, the auditor did not actually look at all of them.  But he took them and added them to the file in case her audited is reviewed.  Mary said that this may seem like a no brainer, but apparently people do not always have copies to give to the auditor.  He seemed to appreciate that he did not have to make copies of anything.
         Have a CPA in whom you trust.  Mary's CPA explains things clearly to her.  She has faith that her CPA prevents her from paying more taxes than she needs to pay.  AND just as important, she has faith that the way she handles deductions, etc. appears logical and clean upon examination. After being audited, now she REALLY appreciates that.
         When you have a good CPA, keep him or her!  Mary's audit of 2007 touched on some cost basis and depreciation decisions that were made back in 2002. Her CPA prepared that return as well and was able to review the calculations and present the information clearly.
Although the audit process was stressful for Mary, her organization and consistency helped her pass her audit with flying colors. 

posted on: 3/7/2010 11:30:00 AM by Katherine Trezise
category: Finances

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Minimizing Financial Clutter

by Katherine Trezise

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About Katherine:

Katherine Trezise is president of Absolutely Organized, based in Baltimore, MD. She is president-elect of the National Study Group on Chronic Disorganization. Katherine holds a masters degree in business administration, is a Certified Professional Organizer® and a Certified Professional Organizer in Chronic Disorganization®. Absolutely Organized specializes in helping people organize their homes, paperwork and financial records to make room in their lives for the things, people and activities that are most important to them.

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