Best Business Practices for Photographers [108]
The IRS guidance for their examiners is to close examinations within 28 months of when your tax return was filed, according to former IRS Special Agent Burton J. Haynes, in an IRS Audit FAQ on FindLaw.com. Haynes notes:
"For example, if you filed your 2004 return on April 15, 2005, the IRS wants the audit completed by August 15, 2007. Legally, the IRS has an additional eight months (until April 14, 2008), but auditors are instructed to complete the audit with at least eight months to spare so the IRS has time to process any appeals.
"If you haven't heard from the auditor, it could mean a number of things. The auditor may have been transferred or terminated. Or your file may be sitting in a pile awaiting processing somewhere in the IRS. When your file resurfaces, a new auditor is under a deadline to close it, which can work in your favor. And, in the best of all worlds, the time limit for completing the audit may expire while your file is in IRS never-never land. So leave the sleeping dog alone."
It is entirely possible that at the end of the audit, there will be no change in your tax liability. It may even be that you paid too much in taxes because, during your receipts organization, you found a series of receipts you had misfiled and thus did not take deductions for. Or, you may end up owing them more money, plus penalties and interest. If you cannot pay and are not appealing, asking for the taxpayers advocate and discussing with them payment options will be the best way to begin to pay your tax liability.
One way to make it easier for you to pay your estimated taxes is to enroll in the Electronic Federal Tax Payment System (EFTPS). Information on it can be found at www.eftps.gov/eftps. From their website: "EFTPS is a service offered free by the U.S. Department of the Treasury to help business and individual taxpayers conveniently pay all their federal taxes electronically." There, you can schedule payments in advance, directly debited from your checking account, and stipulate what each payment applies to.
Now, to close up the story on my audit experience. The examiner was scheduled to come back a few days before the end of January, but we never received the request for the items to spot-document. At the end of March, two months later, we received a return phone call from the examiner, indicating that she was not going to be doing the spot-check, but that she only wanted to do a home office visit to validate the percentage of the home that was attributed to the business. Having been exceedingly methodical about the floor plans provided during the December preparations, including transparent overlays on the floor plans for each floor showing not only the office space areas, but also the desks, chairs, and workstation positions, I felt confident about that documentation, and my fears began to subside even though the audit was still active. What happened in my audit preparations was that I learned I had been underestimating the percentage of the home and detached studio space that was 100-percent attributable to the business, and as such, the IRS would end up owing me money if we opted to re-file, or we would have something to offer as a counter should there have been a suggestion that some other deduction was disallowed. Thus, one might offset the other, and there would be no net difference in the end. I asked my accountant, "If the only thing in the end that gets questioned is the home office percentage, since there is a significant difference between the reported amount and the greater actual amount, should we re-file and recoup that income?" His advice was, "Let sleeping dogs lie—don't re-file. Those tax years are now closed." Advice well given, and thus acted upon.
Chapter 13 Contracts for Editorial Clients
Editorial contracts run a very wide gamut in terms of rights