Thoughtful ThursdayWith tax day almost upon us (though I’m actually getting an extension because of the audit occurring at the same time), we’ll suspend our “celebratory” discussion of my audit with a related question. If you blog under your real name and you want to comment today an assumed name due to Big Brother, feel free.

When you file your taxes, how scrupulous are you?

For the most part I am quite scrupulous, but there are times when I go for the spirit of the law rather than the letter of the law.

For example, I absolutely pay our babysitters/nannies above board, even though it requires extra expense and extra work. The irony is that by being honest and declaring, I’ve opened myself up to additional queries and penalties that my under-the-table friends avoid. Separate from my IRS audit, right now the state is bugging us about a form I forgot to file, with a possible penalty of several thousand dollars.

With the audit, I had no concerns going in because I knew that the medical deductions were valid and true. But with travel deductions, which are another component of the audit, there were some where a stickler auditor could question the decisions. Would you subtract the day in the middle of the business trip when you hung out with your friend or went sightseeing? I deduct the whole thing, but it’s debatable.

The tough ones occur when it’s up to you to be forthcoming, when the government wouldn’t know because the other party doesn’t file anything. I had some income during the year in question that falls under a nebulous category. Some people declare it and some people don’t. I think technically you’re supposed to, but you could make a case that you don’t have to. The employer doesn’t file anything, so it’s up to the employee to declare or not. During one of the years in question, I didn’t declare it, and DH was shocked that his hyper-scrupulous wife tried to get away with something. I couldn’t really tell you whether I did it purposefully or whether it was just an oversight when I was overwhelmed by several thousand other pieces of paper a few hours before the filing deadline. At any rate, the letter of the law truth is getting sorted out now. Most people can get away with quite a bit of tax cheating/fudging, but when your number comes up, oh man does it come up.

Back to the neverending audit paperwork that has taken over my life. Bah!

When you file your taxes, how scrupulous are you?

Audit, Part 3

April 13, 2011

In Part 2, we left off with a need for receipts to document our medical expenses.

One set of receipts I didn’t keep was for acupuncture. At each visit, I’d only receive a little credit card slip. I always threw them out immediately because

  1. I didn’t think I had any reason to keep them.
  2. Those receipts fade quickly.
  3. I went to acupuncture once or twice a week, so there would have been just too many receipts.

So, I asked the acupuncturist to print out a record of all of the visits. The list was so long that it didn’t fit into one envelope, and in fact barely fit into two. One of those envelopes was so stuffed that the extra postage the acupuncturist used was insufficient, and the post office wouldn’t deliver it.

As I stood in line for 20 minutes at the post office to pay the 34 cent balance to get my letter out of postal limbo, it occurred to me: I paid the acupuncturist more than $4000 in 2008 alone. That really should have covered an extra stamp.

Thoughtful Thursday on a related theme tomorrow, then Part 4 of the saga on Friday.

Audit, Part 2

April 12, 2011

Continuing from Part 1 of my audit saga to “celebrate” tax day…

In preparation for the audit, I had to create a list of all of our 2008 medical expenses with the accompanying documentation.

Luckily most of it was all in one place: shoved into a 5-inch tall folder that I shoved in the back of a drawer hoping never to see it again.

I was surprised that there were actually only a handful of receipts from the RE. But, each one was for an exorbitant amount of money.

The medication receipts, on the other hand, were plentiful, since literally dozens of different prescriptions were required for drugs to inject, swallow, or stuff into my hoo-hah.

Unfortunately not all of the receipts were handy.

Stay tuned for Part 3 tomorrow…

Audit, Part 1

April 11, 2011

In “celebration” of American tax day coming up, I bring you a multi-part real-life drama.

Guess who’s being audited by the IRS.

Why?

There are a couple of unusual deductions they’re questioning. The larger of the two is the medical expenses we deducted in 2008.

Because there’s no reason that anyone with medical insurance would spend more than $40K in medical expenses in one year.

No, no reason at all.

Stay tuned for Part 2 tomorrow…