Ask MetaFilter questions tagged with audit

Help me gain better administrative skills at my nonprofit -- audits, accounting, and taxes

johnasdf — Wed, 05 Aug 2009 12:59:31 -0800

Help me with my nonprofit's accounting and audit practices. Just looking for some general tips on (1) learning the basics on accounting; (2) learning how to prepare audits most efficiently; and (3) bonus points for help on the more stringent 2008 IRS filing requirements for nonprofits. I run an arts nonprofit and in a month, my part-time administrative director is leaving. While she is not a bookkeeper or an accountant, she does a variety of related services, such as preparing our files for our audit, paying our bills, doing bank deposits, entering invoices and deposits into Quickbooks, etc.

She and I are planning to put together a new system that will probably involve hiring a part-time bookkeeper, but I will probably have to take on more administrative responsibilities, including the 2008 returns (we got an extension) and the 2008 audit. While we do employ an accountant to help prepare our books for the audit (as well as, of course, our auditing firm), I'd appreciate any advice on the following:

1. How to get a general knowledge of accounting and related business practices. I currently do the budgets (and took a college accounting class), but I'd like to be less intimidated by bookkeeping practices, software, and general administrative process involved with running a small business.

2. Best practices on how to do an audit.

3. Tips on the new more stringent 2008 IRS filing requirements for nonprofits.

I'm generally looking for links to websites or pdfs that might be educational, as well as general tips & suggestions based on your best practices. Thanks!

How should I handle taxes when I babysit?

DeucesHigh — Sun, 03 May 2009 16:29:06 -0800

Baby-sitting employer wants to pay under-the-table, but also claim the Child Care Credit using my SSN as a care provider... isn't this asking for trouble? I'm asking this on behalf of my girlfriend (Ms. DeucesHigh, in a few posts).

Last year, she worked as a babysitter for a local family, watching the kids full-time over the summer, and 10 hours a week during the school year. All-told, she made about $10k in 2008 from them. They never asked for her SSN, there was never any sort of discussion of taxes, and they were not withholding income tax or paying payroll taxes. Clearly it was understood that she was being paid under-the-table, which is the way they handle things with a few other individuals who also watch their kids. (Just to note, I'm not looking for opinions on whether this was a dumb idea, or whether she should have paid her taxes or not -- that can be taken to MetaTalk).

Anyway, this spring rolls around, and her father files her tax return as he usually does; she had a W-2 from a school job, but didn't get anything from her babysitting employers (W-2 or 1099) and he didn't factor in that income.

On the 10th of April, her employers e-mail and ask for her home address and her SSN, so that they could fill out a form to get the Child and Dependent Care Credit (35% of the money they spent on child care, up to $3000 for 1 child, or $6000 for 2 or more). We weren't really considering the ramifications (and she had no reasonable way to refuse, in any case), so she gave them the information.

She sent them a follow-up e-mail asking whether it was a good idea to list them as a childcare provider, since there was no corresponding income reported for her, or expense reported for them. Her employers said that they have done it before with no problems, but that they'd look into it and ask their accountant. Nothing more was said on the matter, and we assumed they did not include her on their return. Today, though, they sent another e-mail saying that they did go ahead and list her as a childcare provider, to get the tax credit... long after it was possible for her to file an amended return to try to preempt any problems.

The Household Employer's IRS Tax Guide references the Child and Dependent Care credit, and vice versa, so it wouldn't be inconceivable to think that the two are often filed together, and probably cross-referenced pretty routinely. It seems like a no-brainer that claiming a tax credit for childcare that is not otherwise substantiated by tax returns would raise red flags for an audit (for her, or for them, or both).

It's somewhat surprising that they didn't 1099 her to leave her unfairly holding the bag for all of the taxes, since that would keep them in the clear to get their tax refund, and most people wouldn't fight it. However, it is clear that their legal responsibility was to pay payroll taxes as a Household Employer (see below). They were required to furnish a W-2 Wage and Tax Statement by Feb 1, and to submit Schedule H to report the household employment taxes.

Given all of this information, what is her best course of action?

-Ignore the situation, and hope that no one gets audited?
-File an amended tax return as though she was self-employed, and get hit with the full self-employment taxes and possible penalties?
-File an amended return as an employee, and file Form 4852 to request a W-2? (she's legally an Employee, as noted below, but she doesn't want to do this, since that gets the IRS involved automatically to hunt for the unpaid payroll taxes, and would probably irk her employers)

Thanks for any input!

---------------------

From the IRS article on the Dependent Care Credit:
"If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. For information, see Publication 926, Household Employer's Tax Guide."

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According to the Household Employer's Tax Guide:

"Do You Have a Household Employee?

You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.

Example: You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.
Household work. Household work is work done in or around your home. Some examples of workers who do household work are: (...Babysitters...Nannies...etc etc)

IF you ...
A-- Pay cash wages of $1,600 or more in 2008 to any one household employee.

THEN you need to...
Withhold and pay social security and Medicare taxes.
-The taxes are 15.3% of cash wages.
-Your employee's share is 7.65% (You can choose to pay it yourself and not withhold it.)
-Your share is a matching 7.65%. "
---------------------

Tax consultant with ACA qualification from UK looking to work in Malaysia

ianK — Sun, 29 Mar 2009 11:05:12 -0800

What are the working opportunities for tax consultants with ACA qualification in the UK looking to emigrate to Malaysia? My girlfriend is currently working as a tax assistant consultant in the UK, studying for the ACA qualification in the meantime, with one more year to qualify.

She would like to emigrate to Malaysia, but worries that by working in tax in the UK, she wouldn't have many transferable skills and experiences, assuming the tax rules in Malaysia to be quite different from in the UK.

How can she best prepare to be recruitable in Malaysia. What field is more desirable in the accountancy profession there?

I has a pain in my linux logging daemon

SpecialK — Sat, 13 Dec 2008 15:58:56 -0800

Calling all *nix sysadmins in the hive mind ... a bunch of Unix and Linux logging/syslog/syslog-ng questions inside. Here's the setup. Syslog-ng 1.6+ on a bunch of SuSE 10.3 and 11.0 / BSD / RHEL 4.x machines set up to stream via tcp to a central machine. Central machine is, at the moment, set up to accept anything coming from machine X into /var/log/central/(machine name)/(facility)-(tag).log unless it matches another rule (for instance, auth and authpriv facilities get combined into one log with a different name.)

There's several questions blobbed in here with a lot of technical details. All of this is being done to meet requirements handed to us by auditors.

The first of those audit requirements is to log when a user accesses a resource by authenticating correctly, and to log when an attempted access is made at both the system, application engine (i.e. apache, mysql, tomcat) and application (i.e. the php, java code) levels. This is completely under control for system level accesses; apache is another matter since we use mod_auth_mysql heavily, but I'm working on that. (And as far as I can tell, it's not even possible with MySQL.) Any suggestions?

The second issue is with logs like php application logs (which are just appended to a file) mysql-error.log, mysql-slow.log, apache access logs, etc -- none of that even goes through syslog in the first place (with the notable exception of apache error logs, which can go to local7:info), so to get it into syslog as a transport layer I have a bunch of lazy man's daemons ... really, shell scripts running a "tail -f | /bin/logger.sh -t (sourcename) &" ... obviously a messy proposition that could cause system load to spiral out of control. Syslog-ng can "follow" a named pipe (which is pretty much what logger.sh does -- route any input to syslog-ng through the pre-existing named pipe), but cannot follow a file that's appended to. The pipe through logger.sh is required because I need to tag the log entry with the source so that we know where it came from.

On one of our systems, which runs a couple of applications plus nagios, I have about ten of these damned things running. With this setup, I dread getting an app hammered on that system because I can see the load average shooting through the stratosphere as all those nice slow shell scripts joust for I/O.

Now, why syslog? Why not just rotate the logs? Well, part of it's for security. I work for a big U. One of the obvious plusses of logging to a remote write-forward-only machine is that you give a cracker TWO systems that they have to remove traces of their nefarious work on. That means that updates to system logs need to be streamed 'live' over the network, not cached on the local machine and then FTP'd over at night when logrotate runs. I swear that these auditors were hired by Catbert.

I can't be the only one with the requirement to reinvent the wheel here. There's gotta be a better solution. Right? Oh, god, please tell me I'm right!

Seriously, any suggestions on how to meet this would be appreciated. Other than just "it's gotta be built out of somewhat stock distributed tools" (In other words, no, I don't want to implement an entirely custom logging solution, I can buy one that will be just as tough to maintain) I don't have any constraints or requirements -- disk space, CPU usage, network bandwidth, etc. are all pretty much moot. I just really don't want to have to reinvent the wheel and it feels like I am... which to me usually a huge sign that "ur doin' it wrong."

Comparing Apples with Apples

chairish — Thu, 13 Nov 2008 10:39:09 -0800

I need to 'audit' some Mac G4 computers and workout which are the best to retain after a lease ends. They are all running Tiger and in a lab situation. Is there some application that I can either run from a network or off a USB key, CD Rom to test the health of the hard drive, processor and memory? Output to a txt file would be a bonus.

How can one explain software licensing regulations and requirements?

Anonymous — Fri, 24 Oct 2008 07:03:46 -0800

What can I use in explaining to my boss how software licensing regulations work? My boss seems to think that we can just borrow software from another department and use it for a project that we need to deploy. I know this is not ethical and I am pretty sure it is illegal, but I am almost certain that my boss does not understand this. My boss is not a computer savvy person and I am pretty sure that he does not understand how these things work. I want to be able to cite a law or something official that will help me convey why we cannot do this, how they catch people who do this (systems and software licensing audits) and what the penalties are when a corporation is caught doing this. What information is out there that will help me in this endeavor?

Competition for Belarc Advisor/Manager?

bartleby — Mon, 07 Jul 2008 12:36:05 -0800

Competition for Belarc Advisor? For a whole network? Mefite reviews? I'm looking for a hardware/software audit & inventory package for a whole WAN network - if it does patches& vulnerabilities, bonus!

After trying the free-for-home Belarc Advisor, I'm looking at a Small Network Option for the whole operation.

I've only been playing with the demo for a day, but I like pretty much everything - I'm not so in love with the format of the reports, but more information is better than none.

So anyone have any love or hate stories?

Anyone use a different/competing product?

I found Belarc early and liked it - the only competitor I found before it was Hyena, but I was scared off by the "Fully Y2K compliant" section of the website.

Looking for a simple HTML sitemap creator

strangeleftydoublethink — Wed, 28 May 2008 09:58:20 -0800

I'm looking for an application that will scan a website (or subsection) and pull out page titles and the URLs into an HTML site map. Or a tool that would convert XML sitemaps into HTML. I'm trying to create a content audit document using the sitemap as a table of contents. Each page title in the TOC will link to a questionnaire about the content on that page.

How to "audit" a linux/oracle system that is administered through a web front end from a windows platform

cantthinkofone — Tue, 29 Apr 2008 12:33:45 -0800

How to "audit" a linux/oracle system that is administered through a web front end from a windows platform .. My google foo has completely failed me and I need some help! So, we have acquired a 3rd party system that runs on a linux box and all data is held in Oracle. 8 or so of us will be configuring the system via the system's back end web interface. Up until now all system we have administered are done by amending linux/unix files and we have simply kept a pre and post copy of the file so we can see what has been changed, by who and why.

Is there a application on the market that would let us do the same thing if, basically, a table somewhere in an oracle database is being updated as a result of a change made through a web front end?

Home is where the debt is?

Anonymous — Tue, 09 Oct 2007 20:30:35 -0800

I'm a woman, divorced, being audited by the IRS, in some credit card debt and have problems with my rental history. Should I sell my home? I got divorced last year after 10 years with my ex, who was an irresponsible mess. We are now being audited by the IRS for the tax year 2005. I moved out of our marital home in October of 2005 after finding out that my ex was smoking meth on a daily basis. Understandably, I was upset and moved in with a friend, then on to an apartment with another friend.

I refinanced the house to pay off my ex, since he is frequently jobless, in multiple tens of thousands of dollars in debt, and addicted to meth. I assumed it would be doable and budgeted accordingly. Then when I changed my filing status at work from married to single, my income went down $300/month. Okay, living close to the bone, but doable. A series of home and car repairs and illnesses later, and I have acquired $5000 in credit card debt. It is a zero interest card for the next year, so again, able to catch up, right?

Now the IRS suddenly audits my taxes. It seems ex-husband told me I could deduct his business expenses as they were part of his income. According to his former employer and the IRS, they were not. Ergo, we owe taxes on $17,000 now and will most likely be audited for 2006 as well.

I have no records showing that I lived anywhere but my actual home until January 4, 2006. The friend whose apartment I moved into decided to break her lease the day after I moved out and back into my marital home during my divorce in 2006. I am being named in a lawsuit alongside said friend (now former, by the way) by the apartment building people, so I cannot ask them to give me documents showing that I moved in there in December of 2005 since they are trying to collect a debt from me, even though I didn't break the lease (turned in keys, parking pass, etc. the day before, but was told I didn't need any documentation to take myself off the lease and trusted former friend to be responsible). The leasing office called me the next week and accused me of collusion, which I denied, and refused to remove me from the lease at that point, even though I had paid all funds and turned in everything prior to said friend "moving out suddenly in the middle of the night." Guess what? Said friend also did meth with my ex and also has no income or assets.

I refinanced my home to pay off my ex; the house now appraises at $18,000 less than it did last year when I got the loan. So, technically, I am $18k in the hole already if I should try to sell it in the soft market. Not a good position.

I have spoken with other friends in the same position (i.e., divorced from a jobless spouse and being audited) and am aware of Innocent Spouse. I am in the process of getting together as much paperwork as I can to show that since the items in question are HIS business expenses, and I believed I was filing correctly, and that we separated that year as a result of his drug abuse and my emotional distress (which I believe counts as spousal abuse in the eyes of the IRS). However, even if I claim Innocent Spouse and it is granted, if my ex has no income or assets to seize, I have reason to believe that the IRS will seize my home as a material asset for the monies owed.

Should I try now to begin the process of selling my home? Even if I sell it at a loss, which I almost certainly will, it would free up monthly income I could put aside to face the impending IRS debt. I am worried if I do put the home up and manage to sell it, the supposed $2000 I owe from the bad-friend-apartment-deal will stop me from finding a place to live.

I'm faced with so much stress and paperwork and the clock is ticking. Sell or keep the house? I helped design and build it in 2003, so it is newish, and has immense sentimental value to me. It's also 15 minutes from my office. I am due a raise in February of an unknown amount which may make the difference in affording the house and paying off my debt, but for now, all I see is debt and veiled threats and am afraid that if I don't cut my losses I will regret it. I live in Texas, by the way.

Who audits the advertised odds on lotteries

PercussivePaul — Thu, 20 Sep 2007 13:30:28 -0800

One in three chance you'll win a free pop, check under the cap! Does anyone audit these advertised odds? I almost never win these things. I figured with one in three odds , maybe this time... but no. Then I started wondering - maybe they're cheating.

I'm imagining some kind of sweepstakes control board, randomly buying bottles of Dr. Pepper at convenience stores across the country to do samplings of who wins... crack statisticians ensuring that winners are evenly distributed across regions... yeah right. So how do I know they're not cheating?

Should I be worried about an upcoming IRS audit?

jasonspaceman — Fri, 22 Sep 2006 07:27:21 -0800

I have an audit meeting with the IRS coming up. What can I/should I expect? Back in 2004, we had flooding in our area. We had at least a foot of standing water at one point then mold started to grow. We applied for aid and we ended up being able to get a low interest small business loan through the goverment, which we are paying back right now. We still have all of our receipts and paperwork from that time, but the idea that the IRS wants another look at everything seems a bit odd.

Should I be worried or is something like this procedural?

Help me save the world, one Audited Financial Report at a time.

viewofdelft — Thu, 14 Sep 2006 12:09:36 -0800

Where can I find the Audited Financial Reports for a bunch of nonprofits? I'm doing postgraduate research on international nonprofits based in the United States. This research requires finding a single piece of information found only on the Audited Financial Reports these nonprofits must file with (most) states' charity offices.

My problem: only a few states have a searchable database of registered charities and even fewer have posted any relevant documents online. I've tried Georgia's office but they're a bit too slow and unautomated. North Carolina and Illinois seem to be the best sources, but their databases are incomplete.

Here is North Carolina's information page for Doctors Without Borders. An example of the audit I'm looking for is linked to at the bottom of this page.

I know it's a longshot, but does anybody have any ideas on where to find a large number of these reports online?

Email auditing and backup, by date?

bkudria — Tue, 16 May 2006 19:20:10 -0800

I've been asked to set up a mail server for a small company with a specific auditing requirement. How do I insure their requirement "show me all emails from May 30, 2005 to June 30, 2005", for example, is fulfilled? I need to be able to store copies of all the emails, and these need to periodically get backed up to external media. The backups also need to be stored by date, and easily retrievable by non-computer users in the even of an audit. CD-R's are fine, I think, since mail traffic is low...but how do I do this? Is there a mail server or extension/plugin/feature to an existing server which will do this?

Thanks.

Fiscal Year End Filter

kaytrem — Fri, 24 Mar 2006 14:02:13 -0800

What's the quickest interactive way to find out a company's fiscal year end? What's the quickest interactive way to find out a company's fiscal year end? If I am talking to a client over the phone and they mention several companies that we might have to audit it's important to know that the companies are 12/31 or june 30 year end. It's possible to scramble around looking for their 10K to find this but what I'd really love is a good search string that'll pinpoint it and/or a website that does this as part of its standard service.

Tax return tips for adult industry?

Anonymous — Sat, 11 Mar 2006 07:36:13 -0800

How can I best avoid an IRS audit? My occupation may complicate things: I’m a professional in the adult entertainment industry with a job that is legal (but often perceived as illegal) and an entirely cash-based business. I want to make filing a tax return a quiet, simple, pain-free process. Just like any other American. However, something tells me an “adult entertainer” with a sole proprietorship with very high revenues for someone my age will certainly cause an IRS-person to give my return a second glance. I know the IRS doesn’t care what I do for a living – they just want a chunk of my earnings, but they do target people in certain professions (waitresses, hairdressers, dentists, lawyers) who earn through tips or who keep their own books. I can’t help but think that if I’m truthful on the occupation line I’ll make myself an ideal target.

I want to deduct my business expenses, but again, don’t want to raise red flags. I’m not talking about a plastic surgery, lingerie and designer shoes. This is airfare, hotel stays, and meals when I’m traveling, the same expenses a businessperson in any field incurs. My expenses were approximately 25% of my income, but should report them as being lower, or not at all to avoid being picked for an audit?

Seriously underreporting my income is an alluring idea, but for several reasons it’s not an option: a) I love my country (even though its laws may not be friendly towards my profession), and I indeed want to pay my taxes in full, b) there’s the “paper trail” of having deposited money into my bank account which would be incriminating if audited, c) I’d like to move my savings plan away from the cash-in-mattress method and towards the more mainstream IRA/stocks/real estate thing. My tone is tongue-in-cheek, but I’m serious :)

For reference purposes, my 2005 income is more than double what I earned in 2004 (which was the first year I earned anything significant) and I filed my 2004 return 6 months late (I know, but better late than never). I’m in my early 20s, and have been a full-time college student for much of the time that I’ve been working in this capacity. I haven’t kept meticulous records and my business is entirely cash-based, so an audit would be unpleasant to say the least.

Super bonus question: Any ideas for what I could tell my parents I’m doing that would explain the income? This is important for tax purposes as well, since they still claim me as a dependent. They know I’m earning more than the average recent college graduate with a B.A. in English, but to actually tell them how much I earn as a “waitress” might give one of them a heart attack. They would rather think I’m selling nuclear arms to rogue states than know what their daughter actually does.

Little note: I love my job, am emotionally healthy, have a great relationship with my family. Some people might not agree with what I do, but I’m looking for advice for my tax return at the moment, and not to start a moral discussion. Thanks! :) I’m posting this anonymously for apparent reasons; I can be reached at krt06@hushmail.com for any private messages.

The only sure things in life are. . .

lannanh — Tue, 07 Feb 2006 21:02:28 -0800

Icky back taxes situation, what would you do (esp. if you know tax law well)? A friend of mine worked for a company for approx 5 yrs believing his income was off the books, it ends up the company was claiming his income the entire time. It now ends up he owes roughly $20K. His wife found a tax attorney from TV and they are about to file an offer of compromise to knock off approx. $15K from the bill. The problem is, my friend says the attorneys overstated his monthly expenses by about $2K. He's afraid if the IRS really looks closely, they will get audited and the situation will worsen. The wife, who handles all the bills, just wants to get it in and move on.

My question is, how likely is it that the IRS will not accept this offer and is it a case where they would just say no and then have to come back w/ a new offer or would they be punished some how?

IRS: Does cashing personal checks at checkwriter's bank show up in an audit?

anonymoose — Tue, 17 Jan 2006 21:18:12 -0800

IRSAuditFilter: If one were to, sayy, cash personal checks at the checkwriter's bank, would the IRS know?