In our Case Study Audit series we will go under the hood of pet sitting businesses and do what no one else is doing in the industry. Find out why companies were audited, how they survived, and their reflections looking back. We are so thankful to these companies for helping us to put truth to all of the rumors that fly around.
Our next case study was done by Dorinne Whynott from Professional Pet Sitting in New Hampshire. After reading this case study, I can’t seem to help but think about how important having a team and detailed records have been for each of the case studies we have released. As you will see below, Dorinne was able to literally hand it over to her CPA and let them handle the entire thing. With already being nervous about simply going through the process, how much peace of mind did she have by having a CPA to give it all to? That was incredible. I like this case study because it shows how seamless and “easy” these audits can be if you do the basic things that all business owners should be doing. Keep great records and have a great team.
BEFORE THE AUDIT:
Do you want this to be anonymous or do you mind telling who you are? If yes, what is your name and company name? Dorinne Whynott
When did you start your business? 1990
Tell us if you had legal council advise you on how to set up and what was right and proper (accountant and lawyer) Accountant CPA
Approximately, what was your annual revenue at the time? Alternatively, would you consider yourself a small (Under 100K) medium (100-250K) or large (250K+) company? Medium
Did you have ICs or employees at the time? Employees
How long did you have staff and what made you choose that classification of workers? Went from myself to employees in 1997, audited in 2007
Were you ever afraid of being audited? Was it ever in the back of your mind? NO
TELL ME ABOUT YOUR AUDIT:
How were you notified that you were being audited? Mail
What department audited you? Not sure
How long did the entire process take? Not sure, my CPA did the whole thing, she scheduled a meeting at her office with them. She told me to NEVER let the IRS come to my home office. She also told me NOT to attend. She had done my taxes for years. I do not think it took very long. They scheduled a time, went over everything and was done.
What was their reasoning for auditing you? Not sure why
Tell us about the help that you had going through the audit. Did your lawyer, accountant, another agency/advisor help guide you through it? My CPA did the whole thing and she did send me a bill for $2000, however, I was found clean by the IRS and did not owe anything.
What did they require from you throughout the audit? I have each year in a file box. I just gave the CPA everything and she decided what to show them or not.
Did the agency involve your staff? NO
How did you feel throughout the process? What impact did it have on your life? Your family? Your business? It really did not impact me at all. I did very little.
When you submitted the evidence they requested, how sure were you that you were going to pass through with flying colors? I figured that I was in good hands and whatever happened, happened. I knew that if there was anything wrong, my CPA would take care of it.
AFTER THE AUDIT:
What was the finding of the audit? That everything was fine. Maybe some very minor corrections but that was about it.
What to do attribute to the findings? Good defense? Bad record keeping? Out of compliance? Etc? A really good CPA and Quickbooks, makes everything so EASY
If you had to make changes, how did you go about making them and what were they? No changes
Did you have to pay back taxes, penalties, fines, interest, etc? How were you able to afford it all? How long did you have to pay them? No
Tell me about how you feel about that audit now. Are you happy or sad that you went through it? Did it make you better? Fine, I just hate being put under a microscope even though I knew they would not find anything bad or if they did, it would be minor
What advice would you give to other pet sitters to try NOT to be audited? Find a great CPA that knows business, use a great accounting software and log everything.
What do you think is the biggest misconception you see being passed around about being audited. That you automatically feel you have done something wrong. In my opinion, there were not many pet sitting companies back then making great money and I think the IRS was trying to educate themselves on our industry and making sure we were complying with the rules.
If you knew then, what you knew now, is there anything you would have done differently? No
Anything else you would like to add? The biggest red flags for the IRS that CPA’s have told me, are that your numbers jump wildly in your deductions from year to year. You want to make your deductions within reason each year. And if they do jump a lot, that you have great records as to why this happened.
I’d like to thank Dorinne for being so open and honest with us. As with all of other Case Studies we have posted, the information is invaluable! It helps sine the light on this AUDIT beast and by this Case Study you can see that it doesn’t always have to be a big scary thing. Having the right team in place, which is something I stress a LOT in Lesson One of the Employee Quick Start is huge! Imagine if Dorinne didn’t have someone she trusted? Imagine if she was scrambling trying not only to find a CPA to take her through an audit but one that really understood the ins and outs of her business? If this is you, and you are reading this right now, I hope we have inspired you to build your tea of excellence now…. so when (not if) you need them in the future, the relationship is already there!
Be sure to comment below and thank Dorinne for her time and willingness to participate in this Case Study!