A contractor friend called the other day. He just went through an IRS audit – the auditor, after going through all his records and asking a ton of questions, some of them going back four or five years, announced, “In my opinion, you owe us $22,000.”

He called and asked what he should do. He described (not my words) the auditor as an arrogant, snot nosed kid with less than two months in the chair as an IRS auditor. I suggested he call a good tax attorney and respond to the auditor’s claim immediately.

There is a warning here. Many of these audits are going to target contractors and we hope you have your taxes and bookkeeping in order. If you do, you don’t have anything to worry about, but if you have been paying other people or contractors under the table, if you have not paid your taxes (the right amount or on time) as required, if your record keeping has not been very good, be prepared. An audit could well turn up this kind of result. Companies that operate this way are prime targets for the government auditors.

Taxes are the price we pay for doing business. If you don’t want to pay taxes, then you might want to move to a country without taxes. Play the game according to the rules. No one likes them – I certainly don’t – but that’s just the way it is. And it’s better than a $22,000 tax bill.

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