We've been a little quieter this week than normal. And here's why. Believe it or not, I was not only audited by the Internal Revenue Service for the first time last week, but also the Ohio Securities Division just five days later. Can you believe it? At least they didn't decide to come on the same day!
For those who are wondering what it's like, here's a quick recap of our experience.
The Tax Collector
About six weeks ago, an IRS auditor called to tell me that my 2005 return had been selected for audit because I had claimed some business expenses on my return that year but no revenues. As a new start up in the second half of 2005, I understood why that was the case (assuredly not our long term plan), but could also see why the IRS's computers would red flag such returns.
My auditor, Dave, was a remarkably pleasant gentleman, especially for the type of work he's in. I can't imagine getting many hugs or warm and fuzzies in his line of work. Dave's been with the IRS for about eleven years and does about eighty or so audits per year. Upon his arrival, he noticed that I had earned my Eagle Scout and mentioned that his eighteen year old son had just earned his. A Scout is Trustworthy, I remembered.
Dave spent the day in my office, looking over the stack of papers I had assembled for our meeting. He must like his job as he worked right through lunch. By the end of the day, he hadn't uncovered anything suspicious and gave me a piece of paper indicating that he had approved my return as filed. He also told me that they like to be able to recover at least $500 to make an audit worthwhile, lending some justification to those who had told me IRS agents always find something.
Before leaving, he told me that unless his supervisor challenged his determination, I would be getting an all clear letter in a few weeks.
The Securities Auditor
At my prior employer, I went through three separate SEC audits over the course of fifteen years. So with this one, I felt I had a little more experience with what to expect.
Our auditor arrived at our offices at 9:30am, five days after the IRS man left. She was a nice woman who had worked for the SEC in D.C. before moving to Ohio with her husband and three children eight or so years ago. I'm guessing that folks in her line of work don't get many hugs or warm and fuzzies either. When making small talk, I asked her where her children attended school in the Cleveland area and she said she wasn't allowed to tell me...
This auditor spent a few hours asking us questions and looking over the materials we had provided her. She also happened to mention that Ohio likes to audit all new advisors during their first two years in business, something that would have been nice to know ahead of time.
At the end of her audit, she told us that the only thing we were missing was a business continuity plan. She said this requirement was relatively new one and that most advisors didn't know about it. We'll have to write a brief paragraph or two explaining what clients should do in the event of our untimely demise. Easy enough and probably not a bad idea.
Two Audits, Five Days, All Okay. But if that's what it takes to keep this bull market going, we'll take it any day.