Audit. What a scary word. Most entrepreneurs FREAK OUT at the sound of that word. You may as well, depending on if you are running your business properly or not.
Recently, I received a letter with that scary word on the front. I opened the letter to find that my insurance company was requiring an audit of my business for the period of 7/1/2016 to 7/1/2017. Now for some, this would be an extremely scary proposition. Scouring your back office for receipts, records, calling your accountant for your tax returns, etc.
For me, I made 2 phone calls. One to my insurance agent to better understands what was necessary, and the second one to my accountant. My insurance agent simply explained that they wanted to find out if I was over or undercharged for my insurance premiums. Do my numbers match? They want 9 different documentation as they go through everything. It can be a bit daunting and frankly stressful. They’re examining if I owe workers compensation for anyone not classified as an employee.
Now I must say that my accountant is AWESOME.
They handle my bookkeeping for me, always there if I have questions and frequently educates this high Type-A personality on the intricacies of books, taxes, and liabilities. The audit was no different. In examining my books, my accountant found that I have a couple of people that I rely on to work occasionally, calling in last-minute kind of thing, and they are classified as “casual labor”. I always thought that as long as they weren’t paid over $600 for the year that I was fine as a business owner. Well, that’s exactly the way that the IRS sees it, but not so much the insurance company. Now I will have to pay the percentage for workers’ compensation in the State of Michigan for those two people for the wages that they earned from my company. Lesson learned. What entrepreneurial truth lessons have you learned? Care to share them with me? Email firstname.lastname@example.org with the subject Entrepreneurial Truths and let’s chat about it in a future blog post here at MitchTaylor.net.