accounting question

The IRS will come after you if you owe significant money--that is, if you've filed but not paid. Generally takes them a year or two, possibly depending upon how juicy a target you seem to be.

As far as audits they supposedly select victims according to guidelines, but what those are I don't know.

I was challenged by them some years after I had closed my business. An eager agent decided--for whatever reason--that I might be running a fake operation. Perhaps she thought I had been laundering money. My records were sloppy but contained every scrap of paper regarding an order or client, stuffed into manilla folders. In other words, notes from phone conversations, sketches, shipping receipts, copies of purchase orders and invoices, blueprints--more or less the sweepings of my desk.

My accountant presented three or four of these thick folders, at which she took only a cursory glance before admitting defeat. Nothing was examined closely nor checked on.

I believe it also helps to use a clean accountant, rather than either a sharpster or to handle things yourself.

Kryianna said:

My MC owns an used bookstore in our world. She's also starting to get additional inventory from supernatural means. She wants to sell these items. Do you have to be able to produce receipts for inventory purchases? Or just that cash went out to make the purchase?

My gut tells me that if she gets audited, she needs to be able to produce receipts. Otherwise she'd be thought to be selling stolen goods (which they aren't, she paid for them, just not in our current world).

So, do you need receipts? If so, and she doesn't have ones that the IRS would accept, would it be plausible to falsify receipts? Is there a threshold at which they'd give a pass (if she has to stay under $50k in income from the sales of these items, she can work with that)?

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I've run a "small used bookstore" online, though not had enough income to get anyone's attention. I've also been on discussion boards with many "real" used booksellers.

It really depends on the prices and valies of the books, especially what the bookseller generally pays when buying books. Regardless, the amount spent on buying inventory can be deducted from reported profits, but one generally needs receipts for buying the books.

For most "average" used bookstores, large volumes of books are bought at library book sales and such, at prices from 25 cents to two or three dollars each. Often customers will bring in books for sale/trade, even boxes at a time. Books brought in are usually for store credit only, but some bookstores pay cash. People have been known to GIVE boxes of books to booksellers (ahem, and they tend not to be very sellable either). These are the kinds of books (that generally sell for $1 to $20, though an occasional rare and valuable book is found this way), and it's really not that big a deal.

If the bookstore deals more in valuable and collectible books (something it sounds like your bookseller might be doing), things get complicated. Is it possible to get a sales recept for these "supernatural" books from a "legit" source? If not, the bookdealer can just take the loss of the books' purchase prices, and there shouldn't be a problem unless she's audited. An auditor might ask "I see you've got these fancy books for sale - where did you get them, and what did you pay for them?" She wouldn't have any good answers.

But there would be no evidence of her stealing books (though perhaps a strong suspicion - there are books so rare that there are a dozen or less known copies worldwide, and if she "comes up" with an extra copy, those places will be checked to see if THEIR physical copies are still there, and even if they are, she will be strongly questioned about where she got the book) unless one of her books actually matched the description of a book that had been reported stolen. Whenever a valuable book is stolen from a bookseller or library, notice goes out. I'm sure valuable stolen books were listed in AB Bookman's, the used-book industry newsletter/magazine for decades (no lnger published), but now they would be listed online and easily findable by searching for title/author.

If these books (the titles and/or authors) don't exist in "our world" except in her bookshop, sooner or later (and probably sooner) someone's going to look one up online, not find it, put pics and scans online and ask lists of hundreds of online booksellers (some of whom have been dealing in rare books for many decades), and not finding another copy, will have a real mystery on their hands. A few books are hand-made and only one copy made, but that would have obvous differences (to an expert) from a commercially made book.

Obligatory bookseller novel references: John Dunning's "Cliff Janeway" mystery series, "Booked To Die," "The Bookman's Wake", etc.

Was that more than you wanted to know?

Since I'm Canadian, I'm talking from the point of view of Canada Customs and Revenue Agency (CCRA), which is the Canadian equivalent of the IRS.

The CCRA knows how much money a business in any given industry in any given area makes. They've been collecting this data for a lot of decades from hundreds of thousands of businesses. They know the revenue and expenses, and more to the point, they know the average percentage for each type of revenue and each type of expense for any given industry. You run a restaurant in the middle of Silicon Valley on such and such a road, and they know how much your servers are actually tipped, never mind what they report. They use these values to determine who to audit, which is anyone who's tax reports show values that differ from these norms. If your business is new, they know how to account for that, too, and they know how much the start up costs should be.

Report earnings that are too low for the industry, and you're audited. Report expenses that are too high for that industry, and you're audited. Submit a tax form prepared by a known or suspected crooked tax accountant, and you're audited. Have a history of filling out tax forms incorrectly or not paying on time? Audited. Fill out the payroll taxes form with incorrect information and get audited for the goods and services tax, corporate tax, and provincial taxes.

What it boils down to is that they look for patterns. Patterns within the industry along with patterns for the owners of the company. If the owner screwed them with one business, they know he'll try it again with another, so that business will be watched carefully. And so it goes.

I've heard tell that the IRS is pretty much the same.

If the books are not from this world then a simple reciept should do. They may be valuable as rarities but they wouldn't have any ISBN or Library of Congress codes. This would make them either older than the current tracking system or published by a very private group. You don't need an ISBN, they aren't mandatory. They do expidite orders and distribution.

FWIW, I've never gotten a receipt for any exchange books I've turned into any of the myriad of bookstores I've given old books to. In fact, after my friend's husband died a few years back, we just brought in bags upon boxes of his books and just donated them to store inventory and was never offered a receipt. The most one store did was track the value (when I wanted it) on a little card of what "store credit" I had towards the purchase of other books. That included one of the mega-used bookstores in Detroit, FWIW.

For a new bookstore, yeah, but if you pick up $5 of used books at a garage sale to resell at your store, but there's still no receipt.

The IRS is more interested in how much money the store is making than where the items are coming from. I'm sure there's some branch of the government that might be interested (assuming it ever knows to check her out), but I don't think it's the IRS.

Depending on how the time-travel works, and what she's looking for, this sounds workable. If she goes for 'scarce' or 'unusual' rather than 'only-five-left-in-the-world rare' she might never even trigger a massive missing-book search. And no need to travel back that far and buy the books new. Wait for them to age a few years and get them second-hand. Or, depending on her ethics, go back to the edges of a war and pick them up cheap from the desperate. How many nice little European bookstores were lost in WWII? And how many owners would gladly have sold for money to get away? She gets a 50 year old receipt, and a provenance. "The man who brought it in bought it in Europe before the war, went back afterwards and the whole street was gone. Wanna see his receipt?"