I was audited!

by Kristina on January 8, 2015 · 9 comments

Yes it’s true.  I just got a notice of assessment from the federal government, almost a year after I filed my 2013 taxes, and they’ve decided I owe them money.  There is nothing more I hate than owing people money or people owing me money.  When I go to sleep every night I like my balance sheet to be at $0 but right now it’s not – and that’s driving me crazy.

What happened

I came home from work yesterday and I had a letter from the Revenue Agency.  I thought maybe it was just another statement of account, but to my surprise it was a letter stating I forgot to claim some income on my 2013 taxes and forgot to declare some of my student loan repayments; therefore I now owe them $437.  WHAT!?  How does $200 in forgotten freelance income and less than $80 in student loan interest equal over $400 in tax fees?  I have no idea.

This isn’t the first time I’ve been audited.  Back in 2011 I was audited for the previous five years and for all that time I ended up only owing the federal government $318.  I wasn’t upset about that at all because I have a great accountant and in the grand scheme of things it’s a small amount of money for five years.  But over $400 for one year is unacceptable in my opinion – but the government disagrees.

Where I went wrong

My current accounting system consists of an Excel spreadsheet and two envelopes full of all my receipts.  I divide them into two categories: food and other business expenses.  I would like to say I add up my expenses each month, staple all receipts together and mark them into my Excel spreadsheet but that wouldn’t be true – although it was my intention last January.  I think it lasted about three months and when spring came around I just started shoving my receipts in the envelops.

In February I’ll spend a day or two sorting through my receipts and adding up all my income and expenses for the year so I can bring my papers to the accountant’s office in March.  Not the most efficient record keeping option, I know.

I would love to double check the federal government’s records because I’m one of those people who honestly believe I’m being screwed over all the time – especially when it comes to money.  I don’t trust anyone, but my accountant is probably going to charge me $200 to verify the government’s notice of assessment.  I don’t want to pay that amount on top of what I supposedly owe the government.

What I’m going to do differently in 2015

This year I am going to keep better track of my income and expenses.  I promise.  Why?  Because I have to.  Spending two days collecting receipts and trying to remember everything I did over the last year is not my idea of fun.  If I spent 30 minutes each month adding up all my income and expenses it would save me a lot of trouble during tax time.  So that’s what I’m going to do.

You’re probably thinking, why don’t you just get a book keeping service?  Because I’m not sure how they work, but I’m open to suggestions.  Does a bookkeeping service keep track of my income and expenses in both Canada and the United States?  Does it track payments received and sent via PayPal and my bank accounts?  All suggestions are welcome.

 



{ 4 comments… read them below or add one }

1 dojo January 8, 2015 at 4:28 pm

It’s good you don’t owe a lot of money. And I agree, doing a bit of ‘accounting’ now and then can really save a lot of headaches in the future. Keeping fingers crossed for you ;)

2 James January 8, 2015 at 10:15 pm

Humm…I think that speaks to the need to have good accounting systems for your personal finance.

3 kg January 9, 2015 at 11:57 am

There are different ways to going about setting up your filing system. I imagine your accountant gives you a tax organizer every year. What I do on December 31/January 1st of every year is close out previous years files by putting them in plastic file boxes and set up upcoming year files. I set up my business files based off the IRS schedule categories, set up a separate folder for each individual bank account, etc. Also have personal folders for W2earnings, medical (sometimes we meet the minimum and can deduct these expenses), bills I pay, etc.

On a mostly daily basis, when I process receipts, bills, paychecks, etc. I make a copy of anything I pay or receive and everything gets filed in it’s proper folder. I also have 12 monthly January – December folders where I put stuff that I don’t know where to file or just want to keep for a while like probably unimportant personal receipts, interesting things, etc.

Right now I’m using quicken because I can generate reports which we review each month after I finish reconciling bank accounts. In Quicken I can also export data to excel spreadsheet.

My husband uses the clipboard method for our daily earnings, automatic savings, allowances, and expenses to monitor our spending and prevent overspending.

Anyway I hope this helps.

4 Kristina January 10, 2015 at 12:30 pm

@Dojo – I agree it’s a small amount to owe but I hate owing money to anyone, especially the government. I guess I’ll have to keep better records this year.

@James – I liked my simple system but I guess it wasn’t the most efficient.

@kg – Thanks so much for the tips. I’m definitely going to look into Quicken.

Leave a Comment

This blog is kept spam free by WP-SpamFree.

Previous post:

Next post: