The shock came two months ago…at perhaps the worst possible time. With two small children already, he and his wife have been expecting a third. His business has been sliding for the past year -- the worst year in many given the economy, despite the hope of recovery shared by friends and others who watched the Dow Jones jump to 10,000 this past week -- and he wonders when the nightmare will be over…can it really be that bad?
Jack kept decent records…but what did that mean? As a rule, accountants advise you to keep every possible receipt, so that even if you can only use some of them to prove your claims, it seems more plausible.
I was with Jack when he got the letter, and I sat next to him when he made the phone call. He described his first visit with the auditor to me in detail and I’m going to relate all of it.
When he first received it, Jack thought the letter was just another form to be filled out, so he just put it aside. Fortunately his accountant, Alan -- a friend whom he consulted more often than he would an accountant whom he didn’t have a personal relationship with --called and told him to open it right away.
The horrified expression on Jack’s face belonged to a man facing a death sentence. The IRS wrote that it was looking into everything… page, after page after page. Jack’s first thoughts, “They’re taking my savings, my house, my vacation money … I might even go to jail.”
Reality slowly set in as Alan calmed him down and told him a few stories about some of his other clients, and Alan and I became friends as well, as Jack put him on speakerphone). I was surprised that Alan didn’t mind the speakerphone, but the stories weren’t as juicy as I’d expected-they weren’t tales of how he’d miraculously helped some shady local clients walk away without paying a dime, or how he’d gotten them refunds from the IRS…-they were just stories about regular guys that we could all relate to.
Alan wanted Jack to grant him Power of Attorney right away, but Jack held back, knowing that Alan was both a friend and inexperienced with audits. Jack decided to solicit advice from several sources before making a commitment. He also decided to have his bookkeeper balance his books and had Alan review her work. Once the preliminaries were out of the way the work began.
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