IRS audit guide

[n175h]

I've been reading some tax books on avoiding audits and came across this IRS publication:

http://www.irs.gov/pub/irs-mssp/laundry.pdf

It is the manual a revenue officer would use to construct estimated income based on your utilities. If anyone ever faces an audit, I would download this and compare your operation to the IRS scenario.

David

[kbc747]

Or you can log all your own info, as in my case I keep a log of income, gas used, water used and income generated from and compared to both numbers. Bottom line if it ever goes to court a judge will take log facts over and IRS or in my case Canadain Government formula of estimations. In doing this for 2 years now it is amazing the amonts the incomes vary week from week. It certainaly shows very quickly the weekness of any formulas that estimate any income in a laundry. For examle the dollars generated per cubic foot of water vary as much as 30% from week to week. Just depends on how many use tops and how many use fronts and now Neptunes. Also big dfferences in dryer revenue to washer revenue, agian I would credit the changes to guys who drop in 10 quaters to dry versus mom who micro dryes. Bottom line I have the numbers and you will now have to prove me wrong.

[goingtoarizona]

I read bought and that book about "Finacial Freedom" in the coin laundry business, I also read that whole IRS booklet online before I bought my mat. Funny thing is, the formulas come close, but neither the IRS or what's his name (by the way, he's in the IRS Biblo.) would believe I do the same dollar volume in eight fourty pound fronts as I do in my 24 18 pound tops. Whatever! By the way , what department of the IRS do you work at?

[n175h]

If your are referring to the original poster of the thread, I don't work for the IRS. I've been in the coin laundry business since 1983. I clipped out an article from the Wall Street Journal with recommended reading on avoiding tax audits. One of the books titled "IRS Problem Solver" by Daniel J. Pilla had the reference to the IRS publication cited above.

In reading the book, it appears I'm doing all the correct things to lessen my chances of an audit, number one being that I report all my income. Where I tend to increase the odds is through the IRS's Market Segment Specialization Program (MSSP). Laundries have a high audit potential because of a history of underreporting and being a cash business. Carwashes are included in the MSSP, also.

I am suspect of the IRS guide for the water to income usage. After reading this board about the bra wires and drain problems on Unimac/Huebsch,Speed Queen washers, I checked all 12 of mine and 6 had wires in them, and 8 of the 12 leaked substantial amounts of water during the cycle, yet closing the pressure switch to advance the timer. I have no idea how many thousands of gallons of extra water goes down the drain because of this. It's dubious to compute income based soley on the manufacturer's calculation in the factory with a new drain and no lint or crap in that valve. Needless to say I am replacing 8 valves as we speak.

I highly recommend you go to the library and read Pilla's book. I learned a heck of a lot of stuff I didn't know about the IRS and my taxes.

I hope like hell the IRS checks out this board from time to time to get industry statistical knowledge. It's obvious from the posts on this board the majority of us are trying to maximize our income and minimize our expenses and achieve the highest standards of service to a consuming public.

David

[DuboisLaundry]

I have a 2-bay carwash, my apartment, and a rental apt all on the same meter. When it is cold, the carwash automatically runs a trickle (called "weeping") through the system to reduce the chance of freezing. Therefore my water usage is much higher than would be solely for laundry revenue. I report income from carwash and apartment rental, and deducted newer, better weeping system. Hope thats enough to get the irs to disregard or pro-rate water usage analysis, if I ever get audited.