The audit of GYST and us personally is now somewhat complete, so I thought I would update you on what has been taking place.

I found out that my initial report of 100 new auditors hired by the IRS was incorrect, they actually hired 2000 new auditors to look at Schedule C returns (those who run a small business). Not only did we find that out, but we also found out that the auditor that we were assigned to is still in graduate school and has not even graduated. This explains some of the questions that we were asked, as I don't think she knows fully what she is doing. At least it explains why our auditor was less informed that I expected an IRS auditor to be.

We were continually barraged with additional questions such as what is the markup of the software we sell? We kept telling her that we don't buy and sell a product so there is no markup as she suggested. She badgered our accountant so much that he finally just made up a number just to get her off our backs.

What we did find out though, is that our accountant made an error in our 2012 tax returns. It had to do with a loan we took out. This resulted in us having to come up with a little less than $3000 that we owe the IRS. That in addition to the penalties, which our accountant agreed to pay since it was their error. This is a sign of a good accountant.

Not only did our account spend over $5000 in labor, but we also "spent" countless hours doing this, at least $3000. So in some respects, we are all out a lot of money. We will have to take out a loan in order to pay off the IRS, since they give you only 30 days to come up with the funds (or else).

So our options were to continue to fight with them, since we also had a number of items we could refile and claim that we had never taken off our taxes, such as a home office etc. or stop the madness and pay up. I was always told that a home office is a red flag for the IRS, but I believe I will take that expense off my taxes every year.

There is also no recourse when you get a badly informed auditor, as everyone knows you can't piss off the IRS. I can say that this was one of the most unprofessional experiences I have had with anyone associated with accounting in my long career. I mean, who hires people who are still getting a degree? It seems they hired a bunch of them.

We finally decided that we were not going to save much money and continue to be dogged by this auditor no matter what we did. It seemed easier to just pay the fine and the back taxes at this point, as neither our accountant or us ourselves could stand it much longer. There is only so much crap that you can take. Since the person assigned to our audit as part of our accountants staff was also in school with the IRS auditor, they could not talk to each other.

We wish the saga would end there, but now we find out that this is the federal taxes, and we will automatically be audited by the State of California.

I will add another chapter once that happens if there is anything interesting. Meanwhile, keep up the good work artists, and don't quit working. Thanks for listening.